Harry Markowitz was the creator of the Modern Portfolio theory died recently at the age of 95. He stated that modern portfolio theory recommends that you diversify with a balance of stocks and bonds and cash that is suitable to your risk tolerance.
Modern Portfolio theory comes from the Markowitz's Paper Portfolio selection published in 1952 which earned him the Nobel Prize. The theory aims at the impact of asset correlation in improving portfolio diversification to reduce the risk taken to get a certain level of return.
The most efficient frontier or portfolios are those with a mix of assets that offer the highest returns for a given amount of risk.
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