Harry Markowitz Famous Quotes
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I would never be 100 percent in stocks or 100 percent in bonds or cash.
We next consider the rule that the investor does or should consider expected return a desirable thing and variance of return an undesirable thing.
During the 1950s, I decided, as did many others, that many practical problems were beyond analytic solution and that simulation techniques were required. At RAND, I participated in the building of large logistics simulation models; at General Electric, I helped build models of manufacturing plants.
Diversifying sufficiently among uncorrelated risks can reduce portfolio risk toward zero. But financial engineers should know that's not true of a portfolio of correlated risks.
To reduce risk it is necessary to avoid a portfolio whose securities are all highly correlated with each other. One hundred securities whose returns rise and fall in near unison afford little protection than the uncertain return of a single security.
The chief problem with the individual investor: He or she typically buys when the market is high and thinks it's going to go up, and sells when the market is low and thinks it's going to go down.
In 1989, I was awarded the Von Neumann Prize in Operations Research Theory by the Operations Research Society of America and The Institute of Management Sciences. They cited my works in the areas of portfolio theory, sparse matrix techniques and the SIMSCRIPT programming language.
Portfolio theory, as used by most financial planners, recommends that you diversify with a balance of stocks and bonds and cash that's suitable to your risk tolerance.
