Creating a Mutual Fund Plan with Python

Mutual funds are investment plans that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, and other securities, managed by professional fund managers. A mutual fund plan is created by selecting the stocks where an investor can benefit in the long term.

A mutual fund plan is created by selecting the stocks where an investor can benefit in the long term. Here’s the process we can follow to create a mutual fund plan:

Step 1: Gather historical stock data, such as closing prices and growth trends over time.

Step 2: Calculate key metrics like Return on Investment (ROI) and volatility (risk) to understand how each stock has performed historically.

Step 3: Choose stocks that have a high ROI and low volatility to ensure a balance between risk and reward.

Step 4: Calculate the future value of monthly investments based on the expected ROI of the selected stocks.

Importing Required Libraries

Defining Tickers and Time Range

2024-12-14 20:55:53.790207

Downloading the Close Prices

Let’s look at the companies with the highest risks for investing:

Now, let’s look at the companies with the highest growth rate for investing:

Now, let’s have a look at the companies with the highest return on investments:

Creating a Mutual Fund Plan Based on High ROI and Low Risk

To create a strategy for selecting companies with high ROI and low risk, we can use a combination of ROI and volatility (standard deviation) metrics. The goal is to find companies that offer a high return on investment (ROI) but with low volatility to minimize risk.

Here are the steps we can follow for creating a mutual fund plan:

1. Define ROI and Volatility Thresholds: We will set thresholds for ROI and volatility to select companies that provide good returns with lower risks.
2. Rank Companies by ROI and Volatility: Rank all companies based on their ROI and volatility scores.
3. Assign Investment Ratios: Allocate more investment to companies with higher ROI and lower volatility.

Let’s start by defining thresholds and selecting companies that meet the criteria of high ROI and low volatility:

To balance the investment between these companies, we can use an inverse volatility ratio for allocation. Companies with lower volatility will get a higher weight. Let’s calculate the weight for each company:

Analyzing Our Mutual Fund Plan

We have created a mutual fund plan for long-term investments. Now, let’s analyze and compare our mutual fund plan by comparing it with the high-performing companies in the stock market. Let’s start by comparing the risks in our mutual fund with the risk in the high growth companies:

Now, let’s compare the ROI of both the groups as well:

The comparison between risk (volatility) and expected ROI for mutual fund companies (displayed in blue) and growth rate companies (shown in green) illustrates a clear risk-reward trade-off. Mutual fund companies exhibit lower volatility, meaning they carry less risk, but they also tend to provide lower expected returns. In contrast, growth rate companies display higher volatility, indicating they are more risky, yet they promise potentially higher returns. Notably, some growth rate companies, like NVIDIA (NVDA) and General Motors (GM), stand out with significant expected returns despite their higher volatility levels. This dynamic underscores the classic investment dilemma: a lower risk generally results in lower returns, while higher risks are associated with the chance of achieving greater rewards.

For long-term investors, the goal is usually to find a balance between stable returns and manageable risk. The mutual fund companies in this analysis show lower volatility, making them less risky options. Their moderate returns make them appealing choices for investors looking for stable, long-term growth without substantial fluctuations in value, which suits conservative investors focused on steady gains.

Calculating Expected Returns for Systematic Investments

Calculating Expected Returns for Systematic Investments
Let’s calculate the expected returns an investor would accumulate by investing $60 each month through our mutual fund plan. Here’s how we can estimate the accumulated returns over different investment horizons:

1. Monthly Investment: Assume the person is investing $60 monthly.
2. Growth Simulation: Use the expected ROI from mutual fund companies to simulate how this investment might grow over time.
3. Compounded Value Calculation: Calculate the compounded growth of these monthly investments for each period (1 year, 3 years, 5 years, and 10 years).
4. Visualization: Present the projected accumulated values for each investment period to provide a clear picture of how the investment might perform over time.

This approach provides potential investors with a realistic perspective on the cumulative growth they can expect by choosing a lower-risk, steady-return investment strategy over the long term.

Summary

So, this is how a mutual fund plan is designed by investment companies for long-term investors. Mutual funds are investment plans that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, and other securities, managed by professional fund managers.

I hope you liked My Mutual Fund Plan Project with Python.