What is the difference between an Efficient Portfolio and an Optimal Portfolio?
The Efficient Frontier graph shows the 30,000 portfolios created to solve for the optimum portfolios that are Maximum Sharpe and Minimum Variance. The Efficient Portfolios are the ones landing on the upward sloping curve that connects the colored diamonds that represent the Optimal Portfolios. The portfolios below the efficient frontier offer lower returns for the same risk, so a wise investor would not choose such portfolios.
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