Expert: Paul Henneman - 11/20/2006

Question
What is your opinion on the mathematical theory of Modern Portfolio Theory (MPT) applied to the stock market? I have a good mathematical background, would you recommend me to learn MPT and apply it to the stock market?
Thank you.  

Answer
Thank you for your question!
Yes, MPT is an interesting research approach to investing. This stressed the importance of portfolio building and the nature of the entire portfolio as a unit, rather than trying to pick individual stocks. The stocks in the portfolio should work together to create an overall portfolio profile, according to this theory. If you are interested in applying this type of portfolio approach to investing, MPT would perhaps be the best place to start.
I found an interesting article online that goes into it in more detail, you may find this very helpful:

http://www.moneychimp.com/articles/risk/riskintro.htm

It would be too lengthy for me to go into depth on the actual nature of MPT here, but the above article does a very good job. I hope you take a look at it.

I hope it is helpful. Please do not hesitate to follow up with me if I can be of any further service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com
www.ValuEngineView.com