One thought on “Modern Portfolio Theory”

  1. Mike Finley says:

    Modern portfolio theory deals with the process of taking many asset classes (bonds, stocks, Real estate), some very risky (Emerging Markets), and by placing them in a diversified portfolio, you can actually reduce the risk of the entire portfolio based on the negative correlations one asset class has with another. It is the seesaw affect at play. When one side is going down, another is going up.

    The wise investor applies modern portfolio theory to their investments in a wise and cost efficient way to reduce overall risk and increase returns over time. Ignore the returns of any one asset class (every dog has its day), and instead, focus on the overall return of the portfolio. Do this with low cost index mutual funds and you are well on your way toward becoming the wise and successful investor.

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