Explain the concept of an efficient portfolio.

Explain the concept of an efficient portfolio. 

Given the same level of risk, different assets give different returns. Under these conditions, a rational investor will chose that combination of portfolio that gives greatest expected returns for a given level of risk. With the given assets, an investor can create many possible portfolios. Any portfolio that can be created out of available assets is called feasible portfolio. The collection of all feasible portfolios is called feasible set of portfolios. Now he has to choose the optimum of the portfolio. For it, he will choose that point on the risk- return space where Markowitz’s efficient set of portfolio is tangent to indifference curve. It is called efficient portfolio.