How to calculate investment portfolio risk using Diversiview?

Why is important to calculate your investment portfolio risk?

The financial market variations that determine high, medium, or low volatility due to commercial, political or economic disputes, generates a certain level of anxiety for each investor. This means that often investors will feel some level of concern about the risk of their investment and the impact of the market volatility on their investment returns. No one will be ever worried about upwards market variations (which bring returns), but almost everyone will be worried about downwards market variations (which may bring losses).

For this reason, calculating the investment portfolio's risk is an essential step in your investment journey; this critical indicator will help you make better decisions to mitigate the inherent risk with a potential better choice of asset allocation and/or diversification.

Before investing, you may want to ask yourself: what do you prefer, a high performance performance with many worries, or moderate yields with greater peace of mind? Your investment return will not just depend on the factors mentioned at the start of this article; it will depend on how much risk you personally are willing to take.

Thus, calculating your investment portfolio's risk is a complex task where you will need to analyse with more in-depth information and try scenarios that allow you to find an efficient risk-return position. Diversiview software lets you calculate your expected investment portfolio's risk and the risk-return position, fast and easy.

What is Diversiview by LENSELL?

Diversiview is Portfolio Optimisation as a Service. In other words, it is cloud-based software  that can be run anytime, from anywhere, that helps self-directed investors and SMSF trustees make better-informed decisions with better data-driven insights. It also supports financial planners, financial advisors and other finance professionals scale up their advisory work with clients, using state-of-the-art technology.

With Diversiview you can calculate critical portfolio indicators such as:

-Portfolio expected return
-Portfolio Volatility (risk)
-Sharpe Ratio
-Portfolio Beta
-Portfolio Alpha

Also, you can get a deep diversification view, at security level, for your portfolio as well as powerful optimisation tools that help you calculate asset allocations (for example, that give the Minimum Risk Portfolio, the Optimal Portfolio, or other efficient portfolios on the Efficient Frontier).

IMPORTANT note: Diversiview is not robo-advice. It does not make investment recommendations automatically. Instead, it gives users more control and allow them to make better choices in their investment journey, no matter the goal (higher return, lower risk or both).

 

Step by step guide:

As we mentioned before, Diversiview first calculates five critical portfolio indicators, including the expected portfolio risk. Let's look at the following example of how to get your portfolio risk with Diversiview:

Step 1 ( Enter your ASX Securities):

Enter your ASX securities and their weight in your portfolios (as percentages, %). Diversiview allows you to enter up to 25 securities (up to 50 on the Elite plan) and you can choose from over 2000 ASX listed securities. 

Note that weights are not mandatory. If you don't know your portfolio composition or you are just trialing a new composition, you may leave the weights empty and they will be assumed all equal for your securities.

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Step 2 (Get Results)  

Click in to Get Results. If you are running a free analysis, you will be notified to enter your name and email address to get the analysis. Please note, cryptocurrencies will not be included in free analyses (with 5 or less securities).

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If you are a subscribed Diversiview user, you will be able to see your analysis (and a history of all portfolio analyses run) in your Diversiview account Dashboard.

Step 3 ( Analyse your portfolio)

See your portfolio analysis results in the top section (Performance & Benchmark). Portfolio risk is the second value, after the portfolio expected return.

Note: you can get more information about each indicator by clicking on the small blue question mark icon. For example, you can see how your portfolio risk is calculated based on trusted financial formulas.

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How else can you calculate portfolio risk?

The formula to calculate investment portfolio risk is quite complicated and require a lot of detailed data. You need to know: the historical volatility (risk) for each of your investments, the weights of each security in the portfolio and the individual correlations between pairs of individual investments. 
 
If you have the data (which is not easy to find either) and if you are patient, you can calculate the portfolio risk when it contains a few investments. But as the portfolio grows, it becomes extremely complex and may take days to calculate (even if you use Excel)!
 
Diversiview is technology that helps you do those calculations and get your portfolio risk (and lots of other information) in seconds. So you can focus on what's most important: making the best investment decisions that work for you!
 
Try Diversiview for Free

Calculate your investment portfolio risk with Diversiview

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Disclaimer: LENSELLDiversiview® is a trademark of LENSELL GROUP PTY LTD. LENSELL accepts no responsibility for any claim, loss or damage as a result of using the information on this website. The website content is provided "as is" for information purposes only, it should not be considered financial advice nor solely relied upon for making any trading decisions. Please consult a finance professional before buying or selling any securities or before making any other changes to your portfolio.