a tt ll. 7 _PorT FeLio A tionp) PoRT Folio: A collection “4 anveet nrerta ov fret ose Aetel oy An Anciniduet ov “y ft drchntn . be Portyeotio Cow CompMae 4 Stock, bot alebentures, Commoctitiv cash, ged Satven tle E SS a a i é ; f Maxinuc tte Rebun Povtfetio das to be nagutnsty racret re tak apuertneri barre a ae Diversify The porktolio wit alw Lelp am Maninns Sing tte vay 4 The Port falro “ Dont KEEP ALL YouR E66S IN \ one Basket" h a a (Page 1) eg eeeeeee ee teeesammenre.|ee a nec. i ce, PACTERA TY BE Cone: DERED WHILe EATING A PeERTFOLIV & = Mini muse : REquLRR me INVEST INVESTING MENTE €OSty s Forrow UP DIVER SIFICATION & Faveghmentt could we mean Ih cost reared the use fhe ti nanuel procucts - ey. broker feas Aradug fees , adui sory fees ' ewchrolian feee Ue * i Stace fhe Pnanuel assetr are su byedeal ; GS Risk, ame chonld have & a pan 11 feng idea to value fhe portfolio ° evols - The Foiloroters an fae Oem the Aisha CSkandarad Devialon ¢ Absolule pasar) C Relatue peas Re Vari aurce Coeff trent of Voriome pea Showpe Ratio ' Re squad aLE is eccention tp knee fhe qwergads of TR vowous seeunber to Calemble Huy Value Q fx Portfolio = Co elt rent SE roan 2h & eth Oh Aclatine Ast. Se TS measure fe Risk Ltewel oleone basic , But Can be nick a Lec on NGVER THE Risk OF THE ENTIRE PORTFoLIO - Leck at fhe panei, assel= * Case | Asser A AsseT #& @xeecrep ‘I RETURN Bey, 30% | s STANDARD sy 207 DEviption Wich ASSET IS moRE STABLE 2 Answer —> ASSET A- Sine Wee Gxpecled Refrans are Somme in both fk cases, The lower Te Stavdmd Dejolion, [he Lowey fhe fsk = What if Me Onpeclid Returns ane ales ol fferent (F9-3) 2 eeCast 2 AaseT nm Asser B Expectent Pe tun 257, 207 Sbrudarct Deviation Is%, 2o¥ Sunie hoth Expected Return ame Ctandard Deviation are eee» fe avtth dine As ertitele co-efhicient ey Varialum” (Cov) Cov = = Standuad Devidlem 2 Expected Return The qe” fer CoV the segs tte Risk. Asset B Cov: ous 0-20 0.25 0-30 . 0-60 0-64 Assee A xs Atable Asters B 42 prone Risky.oe se ne ll a (ret) In 19452 am econentst namer Hard (Markowitz wacle has olssestatsov Vv Porktelio Selecthen'’. He wma Nobel Page tor Ws WweHk- dé Alelzs [he Portfolios Gal rssh ane Acturrn AA fore crapertowk [eax Tie Auk od Actus you a naavr olaned apistrrud= + AND bq A Landing Chin st do pete build a cluarsifred ort-folio nult ple asitt, te minimise the risk amet praxi nse [he Return- By cmat A yougus dock Teasing Paik , one Can seleck 9m ope une portfolio - elt Return, Stamdatel One can tonsicter enpe while Deviolior , Loethicrenl | Vario, Pete a yommeus anvesh 3 fiec. te MPT theory the port folic sheuld be balanced 2% suv a wi overeat rusk ta hovered de be possible fRan an andor dunod apwestiatnl: "Ad ene has high Aitk, bub wher uch Inveskwent 4s combined toil’ olifferent _ oh Bt ge over all We ‘ae on (4 5-) f 3 |a ue Jempkacleea that an indwiolrwt anvestirend- Ath ane rrctutn 2s 4M eaoporlont Than the snteraclion eck 2t Careers wilh Me othe Arvetnenhs An fhe pertpolee , and as a resulk ae The ovenalk pattolio’s behav or > ~r “9 One Can acheve an efficent portfolio by Enyce The wergrla. proportion. g fhe Yotreun semntes: Stnce (Fe enpected attun of fe forttehe aA -wegltd Sum of fhe calevrlaelid> as a atures a] Ha andivrolret asses Cinvestrazat) ov blhur tinanedl asc), ore car Aedarce (he msk bg cheng yauen alturalives 2 srwiatprerks , Conci divans conetderung ther enpectiol Retutn - THus mMpT THEORY SUGSeESTS : dor a giver Level A ask a portfolio EZ madtiple aac cam be constarcld AS ae Maxipuunr Attuan- for oc desioed Level Q portfolios 4h ith Lowest possible expecta MAuan & isk Level - Thus xt act portfolio i crcalid om the Aines 4 met, the tmpak GB morkel- Sage ¢- parlbple adi can be constructed Jf a a oe oo 5 d |tl A amen? a fhe youens cpvest, ety Gh ober tach other: hus ae y tone anwestmendé ain | ctaer Lose 42 aa A Atak Ae overalt 5 foveuraba- = Hence 4b 2s possible Aran an upworol slop A ane fk Connece alt of lke mosl efficent portfolios. This curve’ [Scaled as The EFFICIENT FRONTIER EFFICIENT FRONIIS . aepac corn be i EFFICIENT FRONTIER wo ao “et y opt mum poretelros TRaA- afjerc the keghesk acturn 4” a Ae fine Level misk GW The ; Lowest Aisk, ae" a grime havel y vnpeckl Retvan - - Portfolros tha Lie below the curve called ac Sub, opbimal , becense ee enough ALtian q° v OAL fof proviale g Aisk - Port folro that cluster t The aight ef the Effscrent frontioy ane also sub eptimed becanse freg have o higher fevel OE wsk — Hie clined Aale Q Return - -7.y EFFICIENT FRONTIER Gg x é " a T. “ 6 : Sug OBTIMAL PORT POLIO & . é T vu RK N an optimal tombanction 47 section , Atte ARK) reaes fh, rok é Ail Port folios below the Mave avd The hag ht cide. at Subop amt 4 ZeENerits OF met nae to be a port folie aw 0AM better ovnold actu, without conn Aeduee , yeloeely. Cherae sdetk, ee i ae have negative conrelalim *CRITISISM _ or _iiPT f Based an Peyectit yaluce Q enpeolist Reture Elec leviad from thw Rest petirn a sventat’ evaluolés portfolios om Hu pas we. de be a posaibslhly that Gvo powtfetiee vou hee ee eu Attuuw avd Me adh: dt wet be eonsicerecl ao eye Oleinebte Ande mpT- dt be possible That one porttolro caw howe ent, Bor Small Lexata, but (be olker port bolie bowe Hae SAW Yonmee because se) Aare but spectacles botAte - drvesters are nol ae Anke oral: Assumption OF mpl IrvesPors Are patimal avd Risk AVE - A Aational xrwestor chooses grenter volus ove diks valuc- A ketiorel arueeter Chevacs hiss Mak Ow Ain ccrasestrenl off cet eonnerg 4 parce Chan one porttelic ” autareart Srvestors Can choeae bro oli - eeu ties dike Shaver, Berd, optiors ls The bobihtly sucess presses = wih Pee ite: ‘ — cverlinne -4.