Efficient Frontier

Suppose the investable asset universe consists of N assets.
Investing in only a single asset is inefficient because holding a portfolio of assets eliminates
```
 asset specific risks and earns therefore higher risk-adjusted expected returns.
```
A portfolio on the Efficient Frontier offers the maximum diversification benefit and exposes
```
 an investor to the least amount of risk for a particular expected target return.
```
The furthest left efficient portfolio is the Global Minimum Variance (GMV) portfolio.
Smart investor would always hold an efficient portfolio

Numerical Approaches to find the Tangency Portfolio are well explained in the Handout of Week 3

The Tangency Portfolio is the point on the Efficient Frontier, where the Investors Indifferent Curve touches is the investors tangency Portfolio.