Passive Stock Market Investor (PSMI) holds one stock market index ETF in his/her portfolio, but has learned
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Passive Stock Market Investor (PSMI) holds one stock market index ETF in his/her portfolio, but has learned that investing in a bond market index ETF as well may reduce his/her portfolio risk due to diversification.The annual returns for both ETFs for the last ten years are listed below.Measured by the standard deviation of returns, by how much would PSMI's portfolio's historical risk been reduced if PSMI invested 60% in the stock market index ETF and 40% in the bond market index ETF rather than his current allocation of 100% in the stock market index ETF?
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