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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 297  
Subject: Re: MPT and Efficient Frontier Date: 3/22/2000 5:47 PM
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I'm skeptical about both MPT and Efficient Frontier. Both depend on unknowable assumptions about the future.

Efficient Frontier assumes that correlations that were true in the past will continue to be true in the future. However, there are certain points of history where correlations have changed drastically (bonds vs. stocks for instance).

Efficient Frontier says that it minimizes "risk"--but in what form? My portfolio is not static; as a young saver/investor I'm constantly adding money to it & buying stuff with dollar cost averaging. So I *want* assets that I'm buying to fluctuate, so that I have a good chance of driving down my average purchase price. I don't care at all about how my portfolio as a whole functions in the short term.

For some people, Strategic Global Asset Allocation might meet their needs; for others Efficient Frontier is the ticket.

Personally, I still haven't seen a compelling argument as to why I should be looking at risk-adjusted returns.
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