Using the Efficient Frontier to Maximize TSP Returns
Disclaimer: Past performance does not guarantee future results! However, analyzing past data is often the best tool we have to make educated decisions on how to invest for the future. The methodology I present here is essentially just this - an analysis of past performance to help inform investment decision making today. The Efficient Frontier First things first - what is the " efficient frontier "? Each available investment asset - individual stocks, ETFs, mutual funds, etc. - has a given level of risk and return (calculated based on past performance). These assets can be combined to diversify your portfolio and maximize the expected return at a given risk level. The efficient frontier is just the set of portfolios which provide the maximum return at each level of risk . Just looking at the chart above, you can see that you would obviously want to select one of the green (efficient) portfolios over the red (inefficient) portfolios which fall below it. The reason this wor