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Portfolio Returns & Risk-Adjusted Performance

Why should investors look beyond just portfolio returns when making investment decisions?
Which risk adjusted performance measure is preferred and why?

Please include specific details and at least 2 quality references

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PORTFOLIO RETURNS AND MEASURES

Why should investors look beyond just portfolio returns when making investment decisions?
Maintaining a portfolio means investing in various forms and types of securities. This is a way by which an investor would be able to reduce the degree of risk for particular investments. It is also an application of diversification or of not putting all eggs in one basket.
Investments are made with an expectation of future returns. An investor evaluates all possible investment options or alternatives, weigh each option, then comes up with a decision depending on whether it meets expectations as to: required returns, payback, or safety of investment, etc.
Based on the Portfolio Theory, an investor must be concerned with both risk and returns. A basic goal is to achieve the highest return for a given level of risk.
Risk may be considered as the possibility of an unfavorable outcome. It may be measured by standard deviation or Beta. Risk therefore indicates the variability of returns of a given portfolio. The higher the degree of variability, the higher ...

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