As previously stated maximising the value of a portfolio, or minimising losses, is of fundamental importance to the business of successful investing. Here we take a basic look at using solver in this process. It is not the purpose of theis exposition to go into the fundamentals of solver itself, there are many texts, both introductory and advanced, that do that job. here we will concern ourselves with applying solver to a basic portfolio of four company shares. For the sake of brevity, and the fact that such calculations have been dealt with elsewhere on this site, certain values will be given. Therefore at the outset our four investment wil have standard deviation and expected return already in place, as follows -

In the previous exposition we calculated correlations between the firms under consideration. Here, again for the sake of brevity, the correlations are as follows -

Correlations

We must insert our first estimate into cells B25 to E25, as solver relies on these estimates to start its iteration processes. We also have sells containing the sum of the weights and the portfolio variance.

To use solver we proceed as follows - 1.Click solver in Tolls Menu 2. Target Cell to Portfolio Variance and also click minimum

3. Changeing Cells is completed with B25 to E25 4. Subject to constraints that weights add to 1. 5. Click Solve then OK.

Image One

Image Two

Following the instructions above takes you from Image One (before solver) to Image Two (after solver). This basic introduction gives the mechanics of using solver. A detailed analysis of the

findings will follow.