Simple Heresy

Rules of thumb challenge complex financial analyses 

By Bruce Bower, 11:04 AM May 19, 2011

Harry Markowitz won a 1990 Nobel Prize in economics for efficiently passing the buck — make that bucks. He was honored for developing a mathematical formula that helps investors maximize profit and minimize loss in their portfolios. After an exhaustive analysis of financial information, Markowitz’s procedure allocates a person’s stash of cash to an array of assets, with more money going to better bets.

Many banks rely on this or similar investment approaches, warning customers to avoid pick...

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