Question

Different between feasible portfolio and efficient portfolio

Answer 1

Answer

Explanation:

Feasible Portfolio

A portfolio that can be constructed using the given assets and satisfies the risk and return appetite of the investor at his/her best.

Strong consideration of investor's capital resources , risk tolerance and investment objectives .

Each feasible portfolio has its own risk and reward profile , and is not necessarily an efficient portfolio .

An investor can choose between multiple feasible portfolios.  Risk – Return balance and allocation of funds are the most important activities in managing a feasible portfolio.

Efficient Portfolio

An efficient portfolio is one that lies on the efficient frontier according to the Markowitz rule.

An efficient portfolio provides the lowest level of risk possible for a given level of expected return or highest level of returns at a given risk level.

Answer 2

The difference between a feasible portfolio and an efficient portfolio can be given by:

Feasible portfolio

• A feasible portfolio can be defined as the collection of certain investments which are available for investment with any investor. The investor's availability involves capital resource limits, investment goals, and risk.
• In simple words, a feasible portfolio is that an investor makes with assets that are available to him.
• A feasible portfolio includes maximum risk.

Efficient portfolio

• An efficient portfolio is also the collection of available investments with any investor.
• The collection of assets involves the most efficient results i.e. most level of return from minimum risks.
• It involves minimum risk.

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