The Formation of Portfolio with Fuzzy Approach and Multi-objective Method: A Case Study on Stocks incorporated in LQ45

Forming a portfolio in the investment process is a crucial component. It is because investors want maximum profit while expecting a minimum level of risk. The portfolio composition is inseparable from the weighting of each observed stock. In fact, mathematically, there are still problems when trying to fulfill the preferences that investors want. The research objective was the formation of a portfolio using a fuzzy approach and a multi-objective method. This model simultaneously maximized the return and risk of the prepared portfolio. The result was the formation of a portfolio with two categories, namely risk-seeking and risk-averse, equipped with a λ value of each method, the weight of each stock, the expected return, and risk. Parameter λ was the value obtained from selecting the risk level determined by the investor. Parameter λ was used to assess the level of risk and the expected return on the portfolio preparation. The last section compared the weights, expected return, and risk values of the two methods. As a result, investors in the risk seeker category have the potential to get higher expected returns when using the multi-objective method. In contrast, the fuzzy approach produces the possibility of a higher expected return for investors in the risk-averse category.