2.3 Set up your first strategy: Portfolio Optimisation

Portfolio optimization helps you find the best possible portfolio allocation based on your objectives (e.g. maximum Sharpe Ratio) and constraints.

Step 1: Define your assets and constraints

Start by entering tickers such as AAPL, MSFT, or VTI and their allocations.

• Define min/max weights via Asset Constraints (e.g. Apple must be at least 10%, max. 20%)
• Define Group Constraints (e.g. Tech stocks max. 50%)

You can also enable:

• Custom Expected Returns: Set your own return assumptions
• Custom Volatility: Provide your own volatility values

Both fields are optional and help you reflect more advanced expectations.

Step 2: Set timeframe and benchmark

Under "Options," choose the backtest period.

You can go back 1, 3, 5, 10, 20, or 30+ years, or define custom start and end dates.

The default benchmark is SPY, but you can select alternatives like VT, VXUS, or QQQ.

Step 3: Rebalancing frequency

Select how often you want the optimized portfolio to be rebalanced: monthly, quarterly, semiannually, or annually.

No cashflow simulation is available in optimization.

Step 4: Advanced settings

• Risk-Free Rate: Used for Sharpe Ratio and other metrics (e.g. 2.5%)
• Reinvest Dividends: Enabled by default
• Fill Missing Price Data: Fills small gaps in historical price series

No Monte Carlo simulation is available in optimization.

Step 5: Optimization models

Choose how the optimizer should estimate returns and risk:

• Return Estimation Methods: Sample Mean, EW Mean, Trimmed Mean, CAPM, etc.
• Covariance Estimation Methods: Sample Cov, Semi-Cov, Ledoit-Wolf, Shrinkage, MAD, etc.

These affect how conservative or aggressive the optimization behaves.

Step 6: Compare with another portfolio

Click "Add Portfolio" to add a second strategy.

You can then compare both side by side with your chosen benchmark.

When ready, click Submit to run the analysis.