Optimal investment portfolio theoretical aspects

Abstract

Every investor seeks maximum profit with minimal risk from his investments. Risk can be minimized when investing in several financial securities, thus creating an investment portfolio. The created portfolio must be properly controlled so as not to lose any invested funds. This article provides the theoretical aspects of portfolio management and it explains how risk is diversified within the portfolio. Also this article provides a simplified perspective on the fundamental portfolio construction theory – the Markowitz model. The following methods are used in this article: literature analysis and graphical data representation.