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Strategies & Market Trends : Portfolio Explorer: Optimization -- Ignore unavailable to you. Want to Upgrade?

To: portfolioexplorer who wrote (1)	12/6/1999 11:23:00 PM
From: portfolioexplorer	Respond to of 3

Continuing on with optimization, suppose that you decided that you were ok with mixing in 59% S&P, but didn't like the idea of using 43% margin. What if you wanted to stay at 0% margin? First, you'd have to be aware that even though the two portfolios have the same amount of margin, the Fool portfolio has way more risk than the optimized portfolio. So, while the optimized gets better return for its risk level, it has a much lower risk level and therefore won't make as much money. That said, there's nothing wrong with doing this. But it implies that you were originally taking more risk than you were really comfortable with. Portfolio Return VaR Margin Fool 68.7% 3.96 0% Opt Port 76.7% 3.96 43% Adj Opt Port 42.8% 2.17 0%