Journal Press India^®

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A general issue that often arises among investors is the selection of optimum portfolio according to the desires and requirements of investors. Selecting optimum portfolio is the process of determining the best combination of securities and their weights with the aim of maximizing the expected return and minimizing the volatility. In this article fifteen companies from Indian stock market have been chosen for the analysis. Standard deviation has been used for measuring the risk of portfolios and excel based financial model has been proposed to get the optimum portfolio. In search of better expected return, portfolios have created consisting of initial fifteen stocks, ten stock and five stocks respectively. The result of the analysis indicates that the combination of fifteen stocks gives lower expected return than a combination of ten stocks and five stocks. Further, the portfolio with fewer stocks has higher risk compared to the portfolio with more stocks.  Thus the optimum portfolio consisting of five stocks gives the highest expected return of 34.403 with increment in level of risk.

Keywords

Expected return; Risk; Sharpe ratio; Portfolio; Modern portfolio theory; Stock market.

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