System and method for data collection, evaluation, information generation, and presentation

• US 6,405,179 B1
• Filed: 02/04/2000
• Issued: 06/11/2002
• Est. Priority Date: 03/16/1998
• Status: Expired due to Term

• Current Assignee: Relentless Intellectual Property LLC
• Original Assignee: Saddle Peak Systems
• Inventors: Rebane, George J.
• Primary Examiner(s): Trammell, James P.
• Assistant Examiner(s): Hayes, John W.
• Application Number:
  US09/498,922
• Time in Patent Office: 858 Days
• Field of Search: 705/35, 705/36, 705/1
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A system and method for the optimal allocation of investment funds among a portfolio of investments, and the optimal selection of candidate investments for the portfolio to optimize the financial risk of the investor relative to the financial returns. The system and method create risk tolerance functions for the investor which describe the investor'"'"'s monetary utility through probability preferences with respect to specific currency amounts relative to the investor'"'"'s overall assets restricted to the investors monetary range of interest. The risk tolerance function is then used in conjunction with a computed probability density function of the investment portfolio to create a probability density function of the investor'"'"'s probability preferences with respect to the investor'"'"'s risk tolerance function. The probability density function expresses the dispersion of risk preferences that the investor would experience as a result of the investment allocation. Investment funds are allocated to the investments of the portfolio by maximizing the expected value of the probability density function of the investor'"'"'s probability preferences within a rich environment of possible parameters

Claims

1. A computer implemented method of allocating investment funds of an investor in a portfolio comprising a plurality of investments, comprising:

determining a risk tolerance function for the investor specifying the investor'"'"'s probability preference at each of a plurality of monetary amounts relative to a monetary range relevant to the investor; and

allocating the investment funds among the investments to create an investment allocation by maximizing an expected value of a first probability density function of the investor'"'"'s probability preferences determined as a function of a second probability density function of the portfolio'"'"'s predicted market performance with respect to the investment funds and the investor'"'"'s risk tolerance function.

2. The computer implemented method of claim 1, further comprising:

determining an optimal fraction of the designated available investment funds to invest in the portfolio.

3. The computer implemented method of claim 1, further comprising:

adjusting the allocation of the investment funds to each of the investments in the portfolio the front and back load rate of investment funds.

4. The computer implemented method of claim 1, further comprising:

adjusting the amount of the investment funds available for allocation to the portfolio by a portfolio management fee.

5. The method of claim 1 wherein the range represents at one end an asset level A_H subjective to the investor of contentment and at the other end an asset level A_D subjective to the investor of despair.

6. The method of claim 5 wherein the range encloses the investor'"'"'s net current assets A_T.

7. The method of claim 6 wherein the investor'"'"'s net current assets is an amount representing the investor'"'"'s net worth.

8. A computer implemented method of allocating investment funds in a portfolio comprising a plurality of investments, comprising:

determining a risk tolerance function for an investor specifying the investor'"'"'s probability preference at each of a plurality of monetary investment amounts; and

allocating the investment funds among the investments in the portfolio by maximizing an expected value of the investor'"'"'s probability preferences through the investor'"'"'s risk tolerance function resulting from the probability density function from allocation of the investment funds.

9. The method of claim 8 wherein the plurality of monetary investment amounts are within a range, the range represents at one end an asset level A_H subjective to the investor of contentment and at the other end an asset level A_D subjective to the investor of despair.

10. The method of claim 9 wherein the range encloses the investor'"'"'s net current assets A_T.

11. A computer readable medium storing thereon a software product for configuring and controlling a processor to determine an allocation of investment funds in a portfolio comprising a plurality of investments, the software product comprising:

a risk tolerance capture module that interactively specifies an investor'"'"'s probability preference at each of a plurality of monetary amounts; and

a first allocation module that creates an investment allocation defining a plurality of monetary allocations of the investment funds for the plurality of investments in the portfolio by generating a plurality of investment allocations and selecting the investment allocation that maximizes an expected value of a first probability density function of the investor'"'"'s probability preferences determined as a function of a second probability density function of the portfolio'"'"'s predicted market performance with respect to the investment funds and the investor'"'"'s risk tolerance function.

12. The method of claim 11 wherein the plurality of monetary investment amounts are within a range, the range represents at one end an asset level A_H subjective to the investor of contentment and at the other end an asset level A_D subjective to the investor of despair.

13. The method of claim 12 wherein the range encloses the investor'"'"'s net current assets A_T.

14. A computer implemented method of allocating investment funds in a portfolio comprising a plurality of investments, comprising:

for one or more reference gamble presented to an investor, receiving a decision by the investor and determining a risk tolerance function for the investor specifying the investor'"'"'s probability preference at each of a plurality of monetary investment amounts;

providing a user interface for communication with one or more online investment systems; and

determining an allocation of investment funds among a short list of investments by maximizing an expected value of the investor'"'"'s probability preferences through the investor'"'"'s risk tolerance function resulting from the probability density function from allocation of the investment funds.

15. The method of claim 14 further comprising presenting the investor a user interface associated with a risk tolerance function module and receiving input from the investor responsive to a plurality of reference gambles presented the investor.

16. The method of claim 15 wherein the plurality of monetary investment amounts are within a range, the range represents at one end an asset level subjective to the investor of contentment and at the other end of despair.

17. The method of claim 16 wherein the range encloses the investor'"'"'s net current assets A_T.

18. The method of claim 14 wherein the plurality of monetary investment amounts are within a range, the range represents at one end an asset level defined by the investor as representing monetary contentment and at the other end an amount defined by the investor as representing monetary despair.

19. The method of claim 18 wherein the range encloses the investor'"'"'s net current assets A_T.

20. The method of claim 19 wherein the investors net current assets is an amount representing the investor'"'"'s net worth.