Efficient Frontier

The Efficient Frontier is a concept in investment management that represents the optimal combination of risk and return for a portfolio of assets. Imagine a graph where one axis shows risk (volatility) and the other shows potential returns. The Efficient Frontier is a curve that illustrates the best possible return for a given level of risk. Portfolios that lie on this curve are considered efficient, meaning they maximize returns for their level of risk, while those outside the curve are not optimized. Investors use this to make informed decisions about balancing risk and return in their investment strategies.