Inefficient Portfolio
See: Portoflio.
Risk vs. reward. That balance represents the basic consideration when making investment decisions. If you take a big risk (put your life’s savings in lotto tickets), there had better be the potential of a big reward (the billion-dollar super-jackpot).
An inefficient portfolio is one where the risk/reward balance tips too far toward risk. You’ve taken on too much risk for the return you expect to reap.
The lotto example plays out here. While there's the potential for a billion-dollar win, the chances are vanishingly small. Even sinking your entire fortune of $174.23 into lotto tickets doesn't make it likely enough that you'll win to justify the investment. The risk is so high that it makes no sense to buy.
See: Lottery.
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Finance: What is Efficient Markets Theor...141 Views
Finance a la shmoop what is the efficient markets theory well
there should just be a big picture of Warren Buffett right here it should be [Two men carrying a framed picture of Warren Buffett]
the man Warren explaining the efficient market theory himself and that theory
states that it's impossible to beat the market over a sustained period of time
it should be Warren Buffett who explains that all relevant information comes [Warren Buffett giving a presentation on stage]
public in public stocks and that the market more or less immediately
incorporates all that information in its pricing
hence nobody can ever beat the market over a long period of time so why should [Men falling asleep during a presentation]
Warren Buffett be giving this little definition because the efficient market
theory is wrong Buffett has beaten the market for decades in a row in every way [Warren Buffett beating up the market with a stick]
shape and form so you have a really memorable huge figure in finance this
guy and then pipsqueak professors who are kind of a laughing stock whenever the [Professor jumping on the microphone stand trying to talk]
wealthy power crowds gather in Omaha for their National Convention that's what
they say at the Woodstock of Finance if you will fortunately most people keep [Man with arms folded standing naked in a corridor]
their clothes on for this one