1) The efficient frontier is the set of optimal portfolios

that offer the highest expected return for a defined level

of risk or the lowest risk for a given level of expected
return. Portfolios that lie below the efficient frontier are
sub-optimal because they do not provide enough return
for the level of risk. Portfolios that cluster to the right of
the efficient frontier are sub-optimal because they have a
higher level of risk for the defined rate of return. Optimal
portfolios that comprise the efficient frontier usually
exhibit a higher degree of diversification
Important : Balancing Risk and Reward, Optimal
Portfolios, Portfolio Diversification, . Risk-Free Rate
3) Modern Portfolio Theory (MPT) and Mean-Variance
Optimization (MVO) are often discussed interchangeably,
as MVO is a fundamental component of MPT. However,
there are distinctions between the broader conceptual
framework of MPT and the specific technique of MVO. The
modern portfolio theory (MPT) is a practical method for
selecting investments in order to maximize their overall
returns within an acceptable level of risk. Ultimately, the
goal of the modern portfolio theory is to create the most
efficient portfolio possible. The modern portfolio theory
can be used to diversify a portfolio in order to get a
better return overall without a bigger risk.
4) The Capital Asset Pricing Model (CAPM) is a
foundational financial model used to determine the
expected return of an asset based on its systematic risk
relative to the market.
5) The security market line (SML) is a line drawn on a
chart that serves as a graphical representation of the
capital asset pricing model (CAPM)—which shows
different levels of systematic, or market risk, of various
marketable securities, plotted against the expected
return of the entire market at any given time
6) beta measures the volatility or systemic risk of a security
or a portfolio in comparison to the market as a whole. It
indicates how much the security's returns are expected to
move in relation to the market Beta < 1: Indicates lower
volatility and potentially less risk. Suitable for
conservative investors, defensive investing, and portfolio
diversification. Beta > 1: Indicates higher volatility and
potentially higher returns. Suitable for aggressive
investors seeking higher growth and willing to accept
more risk.