Ask Paula: How to Optimize Your Investments Along the Efficient Frontier (If You Dare!)
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The Efficient Frontier
The way that the efficient frontier works is this, if you take all the different types of investments that are out there, you can plot them on a grid. And so the x axis going left to right, the y axis going up and down. Cash will be the furthest left, and then furthest right, will be things like collectables and small companies. But we also know, and markowits proved this when he was working through this, this idea of diminishing returns. We can take more more risk, but it might not give us more juice.
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