Editing Portfolio Theory (section)

== <span style="color: #FFFFFF;">Remembering</span> ==
* '''Portfolio Theory''' — A theory on how risk-averse investors can construct portfolios to maximize expected return based on a given level of market risk.
* '''Diversification''' — The process of investing in a wide variety of assets to reduce exposure to any single risk.
* '''Risk (Volatility)''' — The chance that an investment's actual return will be different than expected (measured by Standard Deviation).
* '''Expected Return''' — The average amount an investor expects to receive from an investment.
* '''Correlation''' — A measure of how much two assets move together (1.0 means they are identical; -1.0 means they move in opposite directions).
* '''Efficient Frontier''' — The set of portfolios that offer the highest return for a specific level of risk.
* '''Systematic Risk (Market Risk)''' — The "Unavoidable" risk that affects the whole market (e.g., a war or a global recession).
* '''Unsystematic Risk (Specific Risk)''' — The risk that affects only one company (e.g., a CEO getting fired).
* '''Beta ($\beta$)''' — A measure of how much an individual stock moves compared to the overall market.
* '''Sharpe Ratio''' — A measure of "Risk-Adjusted Return"; how much extra profit are you getting for every unit of risk you take?
* '''Asset Allocation''' — The split between different types of assets (e.g., 60% Stocks, 40% Bonds).
* '''Rebalancing''' — Periodically selling "winners" and buying "losers" to maintain your target asset allocation.
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