Quantitative Foundation modern portfolio theory

Knowing which asset class box to be in is difficult, but the solution is simple: spread your money among multiple boxes. That leads to another question - how much money should you put in each box?

In 1990, Dr. Harry Markowitz won the Nobel Prize in Economics for determining the proper asset class allocation, using a mathematically based process called Modern Portfolio Theory4. This award winning work is used as the foundation for the Buy/Hold Plus portfolios.

Risk/Return Assessment the efficient frontier

Modern Portfolio Theory is designed to put you on the Efficient Frontier - a position to receive the most return for the amount of risk you are willing to take.

When most people mix different asset classes together they employ the buy and hold strategy - buy a few good funds and then hold them for the long term. Modern Portfolio Theory expands on this classic, long-term approach by instead using a mathematical process for determining what boxes you should be in, and how much to put in each.

Following Modern Portfolio Theory, our portfolio managers design optmized portfolios to offer the potentially greatest return for each individual investor's acceptable level of risk - positioning you on the Efficient Frontier. Traditional buy and hold portfolios do not offer this optimization, making them "inefficient". This means you can have a portfolio with less return for the same level of risk, or a higher level of risk for the same expected return, and is depicted in the side graphic.