# How to measure the practicality of a market portfolio for long-term investment?

Do you believe that the composition of the market portfolio that you have found is a desirable or practical one as an investment?

Explain why or why not, based on the positions of your stocks.

I have 30 stocks that I'm analysing and found the market portfolio (tangency portfolio) to have these statistics: Mean=0.03972, S.d=0.0568.

How would I know if the market portfolio is desirable or practical? What should I be looking for exactly?

## 1 Answer

There are many things to consider but if my assumption is correct that this question is asked as part of some class I’d mention the following two aspects first:

• The risk-return or Sharpe ratio of this portfolio compared to alternative investments
• The weights of the portfolio. What would it imply if some of them are significantly smaller than zero or larger than one?