pocket advisor robo advisory for investors decision making6341
Mutual funds, a pool of professionally managed securities, are one of the most reliable investment avenues. It is a smart investment choice for both professional and fledgling investors because it is liquid, convenient and reliable. Deciding how and where to invest your money is one of t
2025-06-28 16:34:30 - Adil Khan
Mutual funds, a pool of professionally managed securities, are one of the most reliable
investment avenues. It is a smart investment choice for both professional and fledgling investors
because it is liquid, convenient and reliable. Deciding how and where to invest your money is
one of the most important decisions you have to make. Of course, there’s still the issue of choosing
which mutual funds is best fit for investor, All of those decisions can feel overwhelming,
especially now that there are so many funds to choose from. That’s the problem that robo advisors
are trying to solve. Knowing investor profile will help to work out the kind of investments an
investor should consider. So in this project we are focusing on Creating an Investor Profile
Questionnaire based on Time Horizon, Risk Tolerance and Investment Objective, which will
described the range of Profiles of investors. Classifying mutual funds such as money market
funds, bond or fixed income funds, stock or equity funds etc. Using mutual fund Separation
theorem, Sharpe measure, Treynor measure, Jenson differential measure and some other model
for the evaluation of mutual funds. The idea is to create a robo advisor which will guide the
investor which type of mutual funds are reasonable for him based on his investor profile.
Major objectives of the project are
• To guide the investor where to invest according to his investment behavior.
•Using Models for Evaluation of Mutual Funds.
•Making a portfolio for the investor by risk profiling.
•Build up a Robo Advisor that will assist Investors with guiding which Mutual Funds scheme is appropriate for him depend on Investor Profile.
Project Implementation MethodMethods and Procedures
In this section we are going to discuss the models that we are going to use for the evaluation of
mutual funds and for the procedure of investor profiling we shall be working on.
Models
As we know for investor profiling, Schwab model portfolios provide a simplified approach to
creating an asset allocation plan. A questionnaire will help an investor decide whether one of
these portfolios is right for him or not. Important considerations when choosing your portfolio
are:
? Investor Time Horizon which include about when will an investor begin withdrawing his
money from account, and at what rate? If that date is many years away, he/she may be
comfortable with a portfolio that carries a greater potential for appreciation and higher level
of risk. There’s more time to weather the inevitable ups and downs of the market.
? His/Her Risk Tolerance which include How do he/she feel about risk? Some investments
fluctuate more dramatically in value than others but may have the potential for higher returns.
It’s important that you select investments that fit within your level of tolerance for this risk.
Performance Measures Models
There are four models which are used worldwide for the performance evaluation of mutual funds
(1) Sharpe Measure (2) Treynor Measure (3) Jenson differential Measure (4) Fama French
Measure. We are going to used first three measures excluding Fama French Measure. The reason
for not using Fama French Model is that for this model we needed data on book to market ratio
for all companies
Monte Carlo Simulation
Monte Carlo simulation is a technique used to understand the impact of risk and uncertainty in
financial, project management, cost, and other forecasting models. A Monte Carlo simulator
helps one visualize most or all of the potential outcomes to have a better idea regarding the risk
of a decision.
GARCH Approach
The generalized autoregressive conditional heteroskedasticity (GARCH) process used to
describe an approach to estimate volatility in financial markets. There are several forms of
GARCH modeling. The GARCH process is often preferred by financial modeling professionals
because it provides a more real-world context than other forms when trying to predict the prices
and rates of financial instruments.
Asset Allocation Models
1) harry markowitz model
2) black litterman model
Benefits of the ProjectBenefits of the Project
•This project will help the investors who knows nothing about investment/finance.
•Every Asset Management Company recommend their own funds, but our Robo Advisor will recommend among 19 AMC’s without any biasness.
Technical Details of Final DeliverableDevelop a model behind the robo advisor and interface to pick mutual funds for investor based on his profile.
For this purpose we have to automate every thing of our project and build a app which will guide the investor according to his/her risk profile.
We have to recommend best funds to our clients, for this purpose we have to collaborate with every top fund's Asset Management Companies .
Final Deliverable of the Project Software SystemCore Industry OthersOther IndustriesCore Technology Artificial Intelligence(AI)Other TechnologiesSustainable Development Goals Industry, Innovation and InfrastructureRequired Resources| Item Name | Type | No. of Units | Per Unit Cost (in Rs) | Total (in Rs) |
|---|---|---|---|---|
| Total in (Rs) | 80000 | |||
| App development | Equipment | 1 | 10000 | 10000 |
| web hosting | Miscellaneous | 1 | 10000 | 10000 |
| Collaborations with AMC's and Marketing | Equipment | 6 | 10000 | 60000 |