EFG (MPT) Theory
The Innovation Token of Finance
MPT (The Modern Portfolio Theory) is a theory that can be considered as a financial tool that ECOChain offers to minimize risk on an expected profit level. In other words, MPT is used to maximize returns on a specific risk level. This tool is promised to bring the best results for the stakers while minimizing their risk. That is why MPT is a very common and well-known tool in the field of finance that is widely used by investors.
Modern portfolio theory argues that an investor should not just look at a specific investment’s risk and return, but characteristics should be viewed and evaluated as a whole, which is the overall portfolio risk and return. MPT shows that an investor can construct a portfolio of multiple assets that will maximize returns for a specific risk level. Likewise, given the desired level of expected return, an investor can construct a portfolio with the lowest risk possible.
While the Modern Portfolio Theory is included the word “modern” it is not very modern today since it has been introduced in 1952. Despite that, MPT is still widely used by investors around the world. MPT assumes that investors are risk-averse, meaning they prefer a less risky portfolio more than a riskier one for a given level of return. As a practical matter, risk aversion implies that most people should invest in multiple asset classes for diversification purposes.
All the information mentioned above does not guarantee a 100% profitable investment, it is only a theory that helps the investors make the optimal decisions. This is because every investment has risks involved. Therefore, investing without any information, knowledge, or theory as a tool to help make decisions, that investment usually carries an even higher risk. We hope that this article may help you along with other investors to accumulate knowledge and use financial theories as a tool to take proper decisions before making any investment.
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For more information:
Website: https://efg.finance
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Medium: https://efg-defi.medium.com
Telegram: https://t.me/EFGtoken
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