When it comes to building a portfolio, investors seem only to have one thing on their minds, and that’s returns. After all, a portfolio’s return is what really matters, right? Well, it’s not that simple. The expected return is a big part of that equation, but it’s not the only part.
In fact, it may not even be the most important part.
Both portfolio risk and correlation of asset classes within a portfolio could be bigger determinants of success than just the expected returns. For investors ignoring this pair of attributes, the lesson could be a painful one indeed.