Yes, that would be an appropriate starting point.Is the Tangency Portfolio point on the curve the asset allocation you would first look at as a starting point for determining your adjusted risk?I think you will see that there is no one point that is optimal. Most points on the efficient frontier are acceptable and it is up to the investor to determine how much return is required for a given level of volatility.I don't even know if I am asking this correctly, but does anyone know of a program that would allow you to graph an efficient frontier type graph when you are trying to combine 2 different mutual funds and trying to see the mix where you get minimum risk and maximum reward.
I suppose you could make a spreadsheet, but I don't know all the equations to use. I am trying to simplify my decision on what % of each fund I should put in the portfolio by seeing where different combinations fit on the graph.
Thank you....
The Sharpe ratio is one way of choosing between the wide range of portfolio allocations on the efficient frontier, but sometimes there is still a range of allocations that yield similar Sharpe ratios. The investor is left again to determine what is a significant difference between Sharpe ratios (eg is 0.68 significantly different from 0.69?).
Keep in mind that these curves are based on historical data and future curves may look very different. It is useful to vary the time period and observe the change in the curves to get a feel for the variation with time.
Statistics: Posted by rkhusky — Mon Apr 29, 2024 7:53 am — Replies 6 — Views 648