Why my portfolio score is always bellow 100
Modified on: Thu, 7 Sep, 2017 at 12:46 PM
Our scoring methodology is based on relative values, not absolute. Portfolios with 100% performance score are actually optimal Market Portfolios along the efficient frontier i.e. the portfolios of all equities in the market optimized for each risk level as either having minimized risk or maximized expected return. To create this type of a portfolio will require a supper computer as we will need to allow users to enter all of the equities in the market (about 125,000 in US market along) and then run mean-variance optimization model against these equities. For obvious reason we are not able to provide this type of functionality. Instead what we do is we grade your portfolio in relation to scores of other portfolios in our system which are currently at about 1.2 Millions. For example if you have a portfolio A with a performance score of 5 and you optimize it into portfolio B with a score of 20 you have essentially quadruple your score which is great, but there are still 80% of portfolios in our system that will outperform your portfolio on risk-return scale. This gives you an incentive to continue optimizing until you are satisfied. Generally portfolio with scores of 50+ are consider to be 'very good' from adjusted risk-return prospective.
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