Discuss what is meant by an efficient portfolio

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Reference no: EM132063073

a) As per the CFA guide on ‘Portfolio Concepts’, an “investor’s objective in using a mean–variance approach to portfolio selection is to choose an efficient portfolio”. Discuss what is meant by an ‘efficient portfolio’. Then explain how minimum-variance portfolios are used to construct an efficient frontier. Plot a hypothetical efficient frontier and denote the minimum variance portfolio.

b) “If an investor can make money through passively investing using Exchange Traded Funds (ETFs) in a rising index, there is no need to waste money on an active manager.” Critically evaluate the above statement, using examples where appropriate.

Reference no: EM132063073

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