James Chen, CMT is an expert trader, investment adviser, & global market strategist." data-inline-tooltip="true">James Chen

With this portfolio optimization mã sản phẩm developed by financial academics, an investor can choose a point along the capital allocation line for which khổng lồ invest based on their risk preference. An investor with zero risk preference would invest 100% in risk miễn phí securities.

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The highest màn chơi of risk would invest 100% in the combination of assets suggested at the intersect point. Investing 100% in the market portfolio would provide a designated cấp độ of expected return with excess return serving as the difference from the risk-free rate.

As illustrated from the Capital Asset Pricing Model, Efficient Frontier, & Capital Allocation Line, an investor can choose the level of excess return they wish khổng lồ achieve above the risk không tính phí rate based on the amount of risk they wish khổng lồ take on.

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Risk-return tradeoff is a fundamental trading principle describing the inverse relationship between investment risk & investment return.

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The Capital Asset Pricing mã sản phẩm (CAPM) helps to lớn calculate investment risk and what return on investment an investor should expect.
Jensen"s measure, or "Jensen"s alpha," indicates the portion of an investment manager"s performance that did not have to vị with the market.
Alpha (α) , used in finance as a measure of performance, is the excess return of an investment relative khổng lồ the return of a benchmark index.