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Anyone Using Portfolio Optimization Software?
Old 11-23-2003, 07:54 PM   #1
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Anyone Using Portfolio Optimization Software?

I recently tripped upon this series of articles and it got me to thinking that I should be using every tool at my disposal:

So I'm looking for reasonably priced software that will enable me to use modern portfolio theory to determine the asset mix that will provide the least risk for a given rate of return. Years ago I bought a program called "Wealth Builder" which did that, but they quit updating it, I suppose due to lack of interest. Does anyone here use such software? I'm considering two:

MvoPlus at $169.00:

I've also looked at WATS at $199.00:

Has anyone used either of these? Any suggestions for other software? I'd also be interested in hearing opinions about the value of portfolio optimization. Is it just an academic exercise, or will it likely make real money, in the real world, for those who know how to implement it?

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Re: Anyone Using Portfolio Optimization Software?
Old 11-24-2003, 02:27 PM   #2
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Re: Anyone Using Portfolio Optimization Software?

I am not familiar with such software, but I am very much aware of what others identify as a possible pitfall.

They suggest doing this kind of exercise: take the market as of 1960 (and/or 1970 and/or 1980 and/or 1990) and plug in the data that was available. You can get some really wild results. The software makes an optimization from the data that it has available. If, for example, gold has just run up to $800 per ounce, the software is likely to recommend that you buy gold.

As long as you understand this limitation of the software, it can be quite helpful (or so I have been told). It tends to chase yesterday's winners.

Have fun.

John R.
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