ABSTRACT
Modern Portfolio Theory ...............................................................................................................488 Risk ........................................................................................................................................... 489
Understanding the Risk ........................................................................................................490 Value at Risk .............................................................................................................................490 The Efficient Frontier ................................................................................................................ 491
Capital Asset Pricing Model .......................................................................................................... 493 Passive Investing ....................................................................................................................... 494
Active Asset Allocation .................................................................................................................. 496 Top-Down Approach ................................................................................................................. 496 Bottom-Up Approach ................................................................................................................ 497 Technical Analysis .................................................................................................................... 497 Fundamental Analysis ............................................................................................................... 497
Combining Asset Classes ............................................................................................................... 499 Mean Variance Optimization ..................................................................................................... 499 Monte Carlo Simulation ............................................................................................................ 501
Impact of Taxes ..............................................................................................................................502 Capital Gains .............................................................................................................................502 Cost Basis ..................................................................................................................................502 Performance Measurement........................................................................................................504
