DEFINITION of 'SafetyFirst Rule'
Within the context of postmodern and modern portfolio theory, a safetyfirst rule involves creating a portfolio based on a minimum level of portfolio returns, which is called the minimum acceptable return. By setting up a minimum acceptable return, investors will mitigate the risk of not achieving their investment objective.
INVESTOPEDIA EXPLAINS 'SafetyFirst Rule'
A safetyfirst rule is a form of margin of safety that can be used when creating a portfolio using postmodern portfolio theory. When maximizing the objective function, the expected return used in the security market line equation in lowered, to reflect this margin of safety. The objective function in this capacity is the Sharpe ratio or the Sortino ratio.
RELATED TERMS

Sharpe Ratio
A ratio developed by Nobel laureate William F. Sharpe to measure ... 
Sortino Ratio
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Security Market Line  SML
A line that graphs the systematic, or market, risk versus return ... 
Capital Asset Pricing Model  CAPM
A model that describes the relationship between risk and expected ... 
Capital Market Line  CML
A line used in the capital asset pricing model to illustrate ...
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