The Efficient Frontier explained simply (Modern Portfolio Theory)
Why the best investment keeps changing, and what the Efficient Frontier says about blending different types of investment.
What the video covers
- 0:10 What actually happened over the last five years
- 0:27 The risk and return map
- 0:44 What happens when you mix bonds and shares
- 1:09 Trying every combination
- 1:35 The edge: the Efficient Frontier
- 2:05 How much bumpiness are you comfortable with?
- 2:28 What it’s called
In short
Can you pick the winning investment? Shares, bonds, property or cash: which comes out on top each year? In this short video we explain, in plain English, why the ranking keeps changing, and what the Efficient Frontier (part of Modern Portfolio Theory, from Harry Markowitz in 1952) says about blending different types of investment.
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Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets beyond our control. Investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance cannot be used as a reliable prediction of future performance. Diversification does not ensure a profit or protect against loss. The Efficient Frontier chart is schematic and for illustration only. Asset class rankings are based on index returns in GBP (MSCI World, Bloomberg Global Aggregate Treasuries GBP hedged, FTSE NAREIT Developed World, Bloomberg GBP overnight cash) to 31/12/2025.
