Optimal portfolio investment for individuals (Indian context)

Abstract

We study the type of investments available in India and investors' behaviors. Next, analyze the implications of risk & returns and predictability on the asset allocation of an individual. We form a model for 1-year investment while considering the trade-offs between risk and returns. The model considers the stock market, govt & corporate bond market, money & debt mutual funds, and various 1-year deposit schemes. We take various returns (yield, ROI, etc.) and risk measures (such as standard deviation) to create an optimal investment portfolio. The focus rema ins on small duration investments or long-term liquid investments. The model adjusts the return for various risk factors and provides an optimal mix w ithin the acceptable risk threshold