Part 1 Basic tools and building blocks ............................. 1
1 The rise of robo-advisors 3
2 An introduction to portfolio construction 13
3 Estimating expected returns and covariances 31
4 ETFs: The building blocks of robo-portfolios 53
Part 2 Financial planning tools ...................................... 67
5 Monte Carlo simulations 69
6 Financial planning using reinforcement learning 96
7 Measuring and evaluating returns 118
8 Asset location 130
9 Tax-efficient withdrawal strategies 143
Part 3 Portfolio construction ...............................//....... 163
10 Optimization and portfolio construction 165
11 Asset allocation by risk: Introduction to risk parity 191
12 The Black-Litterman model 214
Part 4 Portfolio management ........................................ 233
13 Rebalancing: Tracking a target portfolio 235
14 Tax-loss harvesting: Improving after-tax returns 273

 Automated digital financial advisors—also called robo-advisors—manage billions of dollars in assets. Follow the step-by-step instructions in this hands-on guide, and you’ll learn to build your robo-advisor capable of managing a real investing strategy.

 In Build a Robo-Advisor with Python (From Scratch) you’ll learn how to:

• Measure returns and estimate the benefits of robo-advisors
• Use Monte Carlo simulations to build and test financial planning tools
• Construct diversified, efficient portfolios using optimization and other methods
• Implement and evaluate rebalancing methods to track a target portfolio over time
• Decrease taxes through tax-loss harvesting and optimized withdrawal sequencing
• Use reinforcement learning to find the optimal investment path up to, and after, retirement

 Automated “robo-advisors” are commonplace in financial services, thanks to their ability to give high-quality investment advice at a fraction of the cost of human advisors. Build a Robo-Advisor with Python (From Scratch) teaches you to develop one of these powerful, flexible tools using popular and free Python libraries. You’ll master practical Python skills in demand in financial services, and financial planning skills that will help you take the best care of your money. All examples are accompanied by working Python code, and are easy to adjust for investors anywhere in the world.

About the technology

 Millions of investors use robo-advisors as an alternative to human financial advisors. In this one-of-a-kind guide, you’ll learn how to build one of your own. Your robo-advisor will assist you with all aspects of financial planning, including saving for retirement, creating a diversified portfolio, and decreasing your tax bill. And along the way, you’ll learn a lot about Python and finance!

About the book

 Build a Robo-Advisor with Python (From Scratch) guides you step-by-step, feature-by-feature as you create a robo-advisor from the ground up. As you go, you’ll dive into techniques like reinforcement learning, convex optimization, and Monte Carlo methods that you can apply even outside the field of FinTech. When you finish, your powerful assistant will be able to create optimal asset allocations, rebalance investments while minimizing taxes, and more.

What's inside

• Advanced portfolio construction techniques
• Tax-loss harvesting, sequencing of retirement withdrawals, and asset location
• Financial planning using AI and Monte Carlo simulations
• Rebalancing methods to track a portfolio over time

About the reader

 Accessible to anyone with a basic knowledge of Python and finance—no special skills required.