RK Wealth Management



The Efficient Frontier

The ability to describe efficient investing started with Harry Markowitz in 1952. One of the results of his Nobel Prize-winning work was the creation of the “efficient frontier” model. Shown as a curved line, the efficient frontier marks the ideal rate of return for a certain amount of risk. Investors of all types strive to stay as close to the line as possible to maximize the effectiveness of their investments.

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RK Wealth Management, LLC | (515) 348-6019 | 1200 Valley West Drive, Suite 403 West Des Moines, IA 50266

This article was written by Advicent Solutions, an entity unrelated to RK Wealth Management, LLC. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. RK Wealth Management, LLC does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. ©2012 Advicent Solutions. All rights reserved.

Securities and investment advisory services are offered solely through registered representatives and investment advisor representatives of Ameritas Investment Corp. (AIC), a registered Broker/Dealer, Member FINRA/SIPC and a registered investment advisor. AIC is not affiliated with RK Wealth Management, LLC or Midwest Financial Solutions, LLC. Additional products and services may be available through Eric Raasch and Chris Kramer, RK Wealth Management, LLC or Midwest Financial Solutions, LLC that are not offered through AIC. Representatives of AIC do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.

100% Stocks

The tradeoff between risk and return is not always equal. Past an 80/20 blend, portfolios begin to gain considerably more risk without significantly more return.

80% Stocks

20% Bonds

Past performance is no guarantee of future results. Risk and return are measured by standard deviation and arithmetic mean, respectively. This is for illustrative purposes only and not indicative of any investment.

100% Bonds

Although bonds are safe investments, an all-bond portfolio carries the same risk as a diversified portfolio while not providing nearly the same return.

20% Stocks

80% Bonds

Minimal Risk

Individual stocks are riskier than bonds. Having a blend of both assets provides true minimal risk.

50% Stocks

50% Bonds

60% Stocks

40% Bonds

Power of Diversification

Some portfolios lack adequate diversity and do not provide the efficiency needed. Increasing efficiency can either decrease risk while maintaining return or increase returns without raising overall risk.

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