1. THE RISK/REWARD TRADEOFFEfficient Market Theory tells us that higher returns can only be achieved by assuming higher levels of risk. I believe Markowitz' Nobel-winning Portfolio Theory proved that higher returns can come with lower risk in a diversified portfolio.Perhaps you are talking about when one's portfolio is already on the Efficient Frontier? At that point, one needs to take on more risk to add return according to academic theory.However, I doubt most people on this board, or any TMF board, are on the efficent frontier, so I doubt EMT applies in this case. Not that I believe in efficient markets anyway...:)Naj
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