FYI: Current thinking about the best way to construct investment portfolios stems from seminal events in 1952, 1993 and 1605. Yes, 1605.
That was the year when perhaps the cornerstone of portfolio construction — the value of diversification — first was articulated in print. While the context had nothing to do with securities, because they didn't yet exist, Miguel de Cervantes observed in his classic novel “Don Quixote” that “it is the part of a wise man to keep himself today for tomorrow, and not venture all his eggs in one basket.”
A more contemporary and securities-specific perspective on diversification, and one that revolutionized portfolio construction, came in 1952 when Harry Markowitz introduced Modern Portfolio Theory. Honored for his work with the Nobel Prize in Economics, Markowitz emphasized the importance of diversification and posited that risk-averse investors can construct portfolios to maximize their expected return based on the level of market risk they wish to assume. The zone of acceptable trade-offs was termed the “efficient frontier.”
Regards,
Ted
https://www.investmentnews.com/article/20190613/FREE/190519991/the-new-paradigm-of-portfolio-construction
