To explain how the Efficient Frontier works, and to show how you can use it to better manage your investment portfolio. 

• Expected Return: At the portfolio level, the return expected on a portfolio based on a probability distribution, and taking into account all possible return scenarios.
• Return Volatility (Standard Deviation): At the portfolio level, represents the variability or uncertainty of a portfolio's return.   
• Efficient Frontier: Graph representing a set of efficient portfolios that maximize expected returns at each level of portfolio risk (or return volatility).  

According to Modern Portfolio Theory, for any portfolio of assets there exists an efficient frontier, which represents variously weighted combinations of the portfolio's assets that yield the maximum possible expected return at any given level of portfolio risk.

The graphic below shows two similar yet very different portfolios - Both contain the same 10 assets and have equal portfolio volatility, yet differ significantly in terms of expected return.  The portfolio labeled "Current" is the one we have constructed and currently hold - It has an expected return of 40.09% and a volatility of 25.55%.  By running our "Current" portfolio through FinPortfolio's Portfolio Optimization module, which charts it relative to the Efficient Frontier, we see that we can actually improve expected returns without increasing our portfolio's volatility, simply by weighting the 10 assets differently.  

The portfolio labeled "Picked" is an optimized (or efficient) version of our "Current" portfolio, located on the Efficient Frontier - While it has the same 25.55% volatility, it has a significantly higher expected return of 43.66%.  As the "Picked" portfolio sits on the Efficient Frontier, it represents the maximum achievable expected return at that level of portfolio volatility.  To actually achieve that expected return, our "Current" portfolio's 10 assets must be re-weighted to match the weightings in the "Picked" portfolio.

Note: FinPortfolio's Portfolio Optimization module will initially display (as a default) the return/volatility profile and asset weightings of the portfolio directly above your "Current" portfolio (i.e. at the same level of return volatility) on the Efficient Frontier.  Of course, since every point along the Efficient Frontier represents an optimal portfolio (i.e. the maximum possible returns given that level of risk), you need not "pick" the portfolio directly above your "Current" portfolio.  Depending on how much more or less volatility you are willing to bear, you can choose any other point along the Efficient Frontier, and rebalance your portfolio to match that optimal portfolio's asset weightings.

• Portfolio Optimization 
• Return and Return Volatility
• Asset Correlation