Goals-Based Investing: Integrating Traditional and Behavioral Finance
By DANIEL NEVINS
Since Harry Markowitz wrote his groundbreaking paper, Portfolio Selection, in 1952, investment professionals have been schooled in a well-known approach to portfolio management. The goal is to build efficient portfolios, those that maximize return for a given level of risk. Efficient portfolios are combined to create an efficient frontier of return opportunities. Investors then select from the frontier, choosing a portfolio that matches their risk tolerance.