Modern Portfolio Theory, the work of Markowitz, and Sharpe, and many, many others, is the foundation of how we think about finance and financial markets. Both Markowitz and Sharpe won the Nobel prize in Economics, and many of their intellectual descendants have done so as well. One of the primary implications of the theory is the economic benefit of diversification – a sort of investing free lunch. The well-diversified investor enjoys the same expected return as her less diversified brother, but she is taking less risk.
Image: John Bogle Expounds THE INSTITUTE FOR FIDUCIARY STANDARD
