The Construction of Optimal Portfolios of Traditional Investment and Alternative Investments

Abstract

This study investigates the factors of portfolio assets composition, weights of assets allocation, and investment period factors on constructing the optimal portfolios. Through the utilization of Markowitz’s Modern Portfolio Theory, the optimal portfolios are discovered through the usage of official past secondary data sources, as well as computer-aided linear problem-solving techniques. 5 assets, namely, SET stocks, bonds, gold, real-estate and bitcoin, are considered in a variety of asset combinations to construct the Efficient Frontier curve and optimal portfolio combinations. According to the findings, the best optimum portfolio so far, is the 5- assets combination of portfolio over the 10-year investment timeframe, with the Sharpe ratio of 6.245, with assets weight allocations of 20.6% stocks, 24.4% bonds, 53.7% real-estate shares, and 1.3% bitcoin. Moreover, the two investment timeframes (5-year period and 10-year period) are both considered and compared with each other to give insights on best possible timeframe to consider. The result is a longer 10-year timeframe, as the returns are more smoothed as well as exhibiting less risk and higher expected return.