Building Logic for Effective Distribution in Stock-Portfolio

Help Needed in Building a Logic to distribute any given amount "X" for "N" number of Stocks with different Prices.

Dear Forum,

I have a situation where I need to develop a scientific and mathematical approach which involves a lot of business sense before I put my money in Stocks.

While Investing in Stocks, we come across a situation where we need to diversify and put our money in specific stocks....Now this step is already been done...

Now, I have already selected the number of Stocks and also the Names of the Stocks...Each Stock has a different price and each is expected to rise or fall differently..

I would like to know how much money I need to put in each Stock so as to earn more profits with that combination.

Ex:-
Lets say If I have $ 10000 and I have selected three Stocks to be bought with this amount..

STOCK-NAME--PRICE------PROFIT
Stock I---------$ 32--------$ 37
Stock II--------$ 55--------$ 62
Stock III-------$ 77--------$ 81

I want to get a Logic which gives me which utilises the Investin amount and buys Stocks in such a way that can yield the maximum Profit...

This is a concept and the No of Stocks can increase or decrease as well as the Investing amount, the logic should be strong enough to be able to expand ...

Hi Richard!

I am looking for a logic firstly a Mathematical Logic to start with which can deal with the given situation and then later it can be Computerised or Excelified...

I am not a Mathematician but I trust with my gut instinct that most of the Moderators and Gurus would be able to help me on this as they are HIgh-Profile Engineers with superb mathematical acumen..

Though my main goal is to make profits but it is also to buy all the three stocks maybe not in the same quantity..

Lets Say If I buy Stock I - 100 nos then I would have spend $ 3200 and Then I would remain with $ 6800 for the other two , then lets say If I buy 70 of Stock II then I would have used $ 3850 and then with the remaining amount i.e. $ 10000 -($ 3200 + $ 3850 ) = $ 2950.

With $ 2950 remaining I would be able to buy $ 2950 / 77 = 38 Stocks of Stock III.

Now I want some helping hand to understand why Im buying which Stock more and which Stock Less and also give mt he appropriate no of Stocks to be bought for each variety.

I am also looking for this logic to be expandable if more no f Stocks are included as well as one more criterion of Risk is Induced alongwith the prices as follows.

STOCK-NAME--PRICE------PROFIT---RISK
Stock I---------$ 32--------$ 37-----HIGH
Stock II--------$ 55--------$ 62-----MEDIUM
Stock III-------$ 77--------$ 81-----LOW

I was thinking of getting some help in buildingthis concept.

Maybe I I could divide the Amount of $ 10,000 in three equal parts of $ 3333 each and increment each portion with some value in the stock which gives maximum profit..

Can someone suggest something more better?

Hi Richard,

Your requirements are still somewhat contradictory. As I said if your main aim is to maximise your profit, then just invest in the stock which yields the highest %.

I agree that they are as its not so linear and more dynamic as diversification is always neccessary when dealing with stocks

If as you intimated you want to invest in all three stocks for some other reason which is unclear,

For two reasons to prevent losses ( "By Keeping all your eggs in one Basket " as the adage) as well as to make more profits..

The Stocks chosen would always be good stocks to Invest In, however within those Stocks what will be the Best Combination to make more profits is the requirement..

If you want to invest in several stocks, then only you can write the rules which you want to apply in determining which stocks and how much.

Yes I want to Invest in several Stocks however not every day and moreover there are different Lifetimes for each Stock to Hold..

Like based on News, there are some Stocks would give a decent appreciation within two weeks while some stocks are very Volatile and can daily allow you to make some profits however it would still be not prudent to put your bet only on these stocks..Then there are the Long Term Investor Stocks which are of Good Companies which give you benefits in the Long Term however these always blocks your Capital..as these are very expensive and only come handful compared to the small up-coming companies..

Until you do this the task is not yet a mathematical one which any of us can help you with.

So we would need to only concentrate the first two type of Stocks which can be traded on a Short Term like a (Week to 15 Days ) or very Short Term of a Day or Two..Hope this is a good explanation...

I have also a School of thought where I could equate the Stock Prices mathematically but do not know how..

STOCK-NAME--PRICE------PROFIT
Stock I---------$ 32--------$ 37
Stock II--------$ 55--------$ 62
Stock III-------$ 77--------$ 81

Whether making a Profit of $ 5 on $ 32 purchase is better or a $ 7 on a buy of $ 55 or $ 4 on a buy of $ 77..

Some Analogy, In Cricket the Opener may score a Century in lets say 132 balls and a 6 Down Batsman a quickfire 26 in just 9 balls..Now how can you equate both eye for an eye terms....as both innings are of consequence..

Until you give us something to work with I don't see how we can advise

Hope this would be useful..

Originally Posted by teylyn

So, come up with clearly defined criteria, and a solution will be much closer.

Actually, I am also confused about that and am trying to build some concept which can later be Excelified..

So, I shall go in hibernation for some time to ponder over it..This is not regular stuff and moreover it involves money so need to be very prudent..