Portfolio Optimization for Junior Investors under Different Industries

Portfolio optimization has long been considered as an integral procedure of the financial markets. However, optimizing the portfolio may be difficult for junior investors. Therefore, this paper conducts a portfolio containing five diversified assets covering the e-commerce, entertainment industry, finance and insurance, and energy industries, and explores the optimal portfolio by maximizing the Sharpe ratio and minimizing the variance for each of these five assets through three models which are mean-variance analysis, CAPM and FF3F model. The results show that under both the FF3F and CAPM models, DIS has the maximum investment weight in maximum Sharpe ratio portfolio, while GLD has the maximum investment weight in minimum variance portfolio. We then added a risk-free asset to the existing portfolio, and the results display that adding a risk-free asset can further optimize the portfolio's return and reduce its risk. This research can be useful for potential investors who are into investments in related industries.