In this episode Derek Moore discusses what Modern Portfolio Theory (MPT) and Efficient Frontier Investing means and how traditional investment risk rely heavily on standard deviation and variance to determine where a portfolio fits into a risk metric. Plus, Derek comments on how positive upside returns can actually increase traditionally used investment ratios like Sharpe.

Key  Takeaways:

• • What is Modern Portfolio Theory
• • What is an Efficient Frontier Portfolio?
• • How is investment portfolio standard deviation calculated?
• • Easy ways to understand standard deviation using simple three-day temperature example
• • Explain what a risk adjusted return means in relationship to portfolio returns and volatility
• • Problems with traditional portfolio design especially given low bond yields
• • Why being long markets while being hedged may be more optimal for investors near retirement?
• • How Sharpe Ratio may get worse after strong upside market move.
• • Alternatives such as post-modern portfolio theory only considering downside deviation. 

Mentioned  in  this  Episode:

Broken Pie Chart Book by Derek Moore https://amzn.to/2COXRAS

Target Date Funds https://razorwealth.com/podcast-target-date-investment-funds-good-bad-or-just-misunderstood/

Modern Portfolio Theory (MPT) + Efficient Frontier https://www.investopedia.com/terms/e/efficientfrontier.asp