What is the 'Efficient Frontier'
The efficient frontier is the set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a given level of expected return. Portfolios that lie below the efficient frontier are suboptimal, because they do not provide enough return for the level of risk. Portfolios that cluster to the right of the efficient frontier are also suboptimal, because they have a higher level of risk for the defined rate of return.
BREAKING DOWN 'Efficient Frontier'
Since the efficient frontier is curved, rather than linear, a key finding of the concept was the benefit of diversification. Optimal portfolios that comprise the efficient frontier tend to have a higher degree of diversification than the suboptimal ones, which are typically less diversified.
The efficient frontier concept was introduced by Harry Markowitz in 1952 and is a cornerstone of modern portfolio theory.

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What are the advantages of portfolio planning with the efficient frontier?
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How have portfolios from within the efficient frontier performed historically?
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Which of the following is the most true regarding the type of assets found along ...
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Why is risk return tradeoff important in designing a portfolio?
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How do I calculate the production possibility frontier in Excel?
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What level of correlation among investments will guarantee market returns but have ...
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