Our ETFs Portfolio Models and corresponding indexing are going to be based on our Proprietary Research and Cognitive Computing. The underlying theme of our research is based on revolutionary Modern Portfolio Theory (MPT) as explained below:
In 1952, Harry Markowitz, the Nobel laureate, published a paper in the Journal of Finance called “Portfolio Selection.” In this paper, Markowitz stated that investors could create optimized investment portfolios by focusing on assets, risk-reward ratios, and diversification.
The main theme of his paper was that an asset’s individual risks and potential returns are not as important as how these are combined into the overall portfolio mix. Markowitz investigated how to achieve optimal portfolios based on a given expected return for a given level of risk. The idea was to experiment with different investments for reducing the overall riskiness of a portfolio. The Modern Portfolio Theory emerged as the foundations for work done by the Investment Advisers and Portfolio Managers today. The key message of MPT that different levels of investments are matched to different risks levels and that diversification combined in a peculiar way mitigates the overall risk of the Portfolio was a revolutionary one.
More importantly, MPT gained more traction with the introduction of indexing in the Mutual Funds and later in ETFs.
The first Index Fund was launched under John Boggle’s leadership at Vanguard in 1975. From this point onwards, indexing became a key application of MPT where different risk profiles were matched with different investments in a diversified portfolio setting.
When index funds are constructed into a Portfolio, there is an instant application of MPT. The Investment Industry uses MPT to construct Portfolios for their clients. These portfolios are designed to mitigate the underlying risks in the Portfolio and optimize returns for a given risk level. This strategy is most effective using ETFs because of low-cost diversification which can be achieved using ETFs as a tool.
The Financial Advisors typically change composition between the Asset Classes (Bonds vs. Equity) in order to define a risk-reward matrix. For example, as the client ages, typically more weight is shifted from Equity to Bonds using an algorithmic formula. Typically, clients who are younger are weighted more in Equity ETFs whereas older clients (both for pre and post-retirement) are weighted heavily in Bond or Fixed Income ETFs.
Robo-Advisors are using AI to design sliding scales using MPT giving more Equity exposure to clients who are younger and designing more Fixed Income and Dividend based ETFs for the retirees. Regardless, MPT theory leveraging index ETFs is the most cost-effective and efficient way to drive optimal retirement portfolios. With the emergence of cryptocurrencies and crypto assets, we can now leverage MPT in a more powerful way to diversify Index ETFs and provide outstanding products to Robo-Advisors. This is the core vision of Kryptoin to provide both Alpha and Beta Strategic Index ETFs to Robo-Advisors and the investment community using our proprietary MPT research. Same MPT principles are also deployed by us for the rebalancing of our proprietary models explained below.
The Kryptoin System is designed to generate a complete Portfolio of ETFs for the Robo-Advisors and the Financial Advisory Industry. We deploy our proprietary technology to research, engineer and build these unique models, as well as find an optimal path toward the rebalancing of these models. Rebalancing has assumed great importance given the volatility of crypto as well as financial markets.
We are providing flexibility and customization to the Financial Advisors, Asset Managers and Robo-Advisory using our proprietary technology. We have thoroughly researched our models as well as designed and back-tested them under different market conditions for optimal risk-reward outcomes. This stress testing is important given the unexpected market volatility in the cryptocurrency markets. In short, this provides complete one-stop tool-box for driving Alpha as well as Smart Beta Strategy to the Robo-Advisors and Financial Advisory in North America, Europe, and Asia.
Invest in the Kryptoin ETF public token sale on November 1, 2019, via Dutch Auction here at https://kryptoin.io/.
