4.3 The Efficient Frontier Explained
This article introduces the Markowitz Efficient Frontier as a way to visualize the best possible trade-offs between risk and return. It walks through the math behind expected return, volatility, and the Sharpe ratio, and shows how changing asset allocations creates new portfolio points along the frontier. A practical example compares five mixes of two funds (BND and VT) and explains diversification, trade-offs, and transition maps.