Modern Portfolio Theory: Explanation and Practical Futility

Modern Portfolio Theory: Explanation and 3 Reasons We Should Discard ItModern portfolio theory has been the most widely accepted financial theory of investment portfolio optimization in academia and among many large mutual funds. However, this supposed success has not been reflected in the financial profitability of his followers. In this article I will explain what modern portfolio theory consists of, the reasons for its popularity and I will give you 3 reasons why this theory is useless and we should discard it.

What is modern portfolio theory?

Modern portfolio theory (“modern portfolio theory” or “MPT”) is a model for the creation and optimization of investment portfolios by combining different types of assets. It was devised in 1.952 by value investing to make your capital profitable. Your savings will thank you.