how is the efficient frontier constructed 
the efficient frontier rates portfolios on a coordinate plane plotted on the x axis is the risk while return is plotted on the y axis annualized standard deviation is typically used to measure risk while compound annual growth rate cagr is used for return the bottom linethe efficient frontier comprises investment portfolios that offer the highest expected return for a specific level of risk it represents graphically portfolios that maximize returns for the risk assumed showing the benefit of diversification to use the efficient frontier a risk seeking investor selects investments that fall on the right side of the frontier meanwhile a more conservative investor would pick investments that lie on the left side of the frontier 