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.
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BREAKING DOWN '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

Roy's SafetyFirst Criterion  ...
An approach to investment decisions that sets a minimum required ... 
PostModern Portfolio Theory  ...
A portfolio optimization methodology that uses the downside risk ... 
Modern Portfolio Theory  MPT
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Portfolio Return
The monetary return experienced by a holder of a portfolio. Portfolio ... 
Downside Deviation
A measure of downside risk that focuses on returns that fall ... 
Sharpe Ratio
The Sharpe Ratio is a measure for calculating riskadjusted return, ...
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