Methods and systems for optimized and diversified portfolios

A system for optimizing a composition of an investment portfolio, the system comprising:

• at least one optimization computing device comprising one or more processors, a non-transitory computer readable medium and a communication interface device, the one or more processors communicatively coupled to the non-transitory computer readable medium and the communication interface device;
• the non-transitory computer-readable medium comprising computer-executable instructions stored thereon that when executed by the one or more processors cause the one or more processors to:
• receive, via the communication interface device, a risk tolerance level for the investment portfolio;
• receive, via the communication interface device, an investment objective;
• determine constraints for the investment portfolio based on the risk tolerance level;
• receive, via the communication interface device, a selection of a previously curated core portfolio;
• receive, via the communication interface device, a selection of one or more assets to add to the core portfolio, to generate the investment portfolio;
• determine if the investment portfolio satisfies the constraints;
• if the investment portfolio satisfies the constraints:
• receive, via the communication interface device, a selection of a benchmark portfolio comprising the core portfolio or another selected portfolio;
• obtain, via the communication interface device, market data for (i) the core portfolio and the benchmark portfolio, and (ii) the investment portfolio;
• perform Principal Component Analysis (PCA) on the market data of the core portfolio to generate a first factor model having a first number of independent factors representing or exceeding a threshold percentage of portfolio variance;
• perform said PCA on the market data of the investment portfolio to generate a second factor model having a second number of independent factors representing or exceeding said threshold percentage of portfolio variance;
• compare the second number of independent factors to the first number of independent factors;
• and conditionally initiate an automated portfolio optimization operation only when the second number of independent factors exceeds the first number of independent factors, and wherein the automated portfolio optimization operation comprising generating recommended asset allocation constraints for the investment portfolio.