115 CFA
File: Portfolio Management - Reading 51 - 1. A Portfolio Perspective on Investing

1. A Portfolio Perspective on Investing

a. describe the portfolio approach to investing;

What is the purpose of portfolio theory of investing?
Portfolio theory is used to maximize an investment's expected rate of return for a given level of risk or minimize the level of risk for a given expected rate of return.

What is diversification ratio?
The diversification ratio is the ratio of the standard deviation of an equally weighted portfolio to the standard deviation of a randomly selected security.

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