Research on diversified fund allocation strategy

Abstract

Money management is crucial in investing and is an important risk management tool. It can affect the magnitude of an investor's loss from a number of perspectives, including the reasonableness of position management, the effectiveness of capital allocation, the setting of stop-loss strategies, the degree of diversification of investments, and the regular evaluation and adjustment of capital flows. The purpose of this paper is to investigate the capital allocation issue in money management. Through a decade-long history of back-testing and evaluation of multiple indicators, this paper analyzes and compares three different methods of capital allocation. The methods mainly include the equal allocation of funds method, the profitability preference method, and the risk adjustment method. The results show that the Profit Preferred Method performs best in terms of strategy return and risk-adjusted return, while the Risk-Adjusted Method excels in the control of maximum retracement and is suitable for risk-averse investors. Despite the lower returns of the equal distribution method, its stability is still attractive.