A research using the combined CDC algorithm and Markowitz in mutual fund portfolio - An example using the Taiwan funds

Most investors rely on professional fund managers to invest in stocks, bonds, futures, options or funds. Investors benefited from the growth of funds. Although investors may refer to the mutual funds performance appraisals for making investment decisions, the market place is too volatile and does not guarantee the performance of any Mutual funds. The purpose of this Study is to locate suitable investment portfolio and weighted ratios to increase investment effectiveness. The proposed technique involves the combined use of the CDC algorithm and Markowitz M-V Model for analyzing the portfolio. The CDC algorithm combines Clusters of similar funds Into the same group in order to locate funds with the promising investment ratios so as to improve investment profits. Experimental testing is performed using 39 Taiwan funds with aggressive growth and growth funds from the years 2004 through 2007. Results showed that profits from the combined CDC algorithm and Markowitz were higher compared to those using Markowitz. This research can effectively allow Investors to find the suitable funds and weight ratios and to increase investment profits.