Suppose you can invest in either or both a risky asset within an expected return of $10\%$ and a risk free asset with an expected return of $2\%$ suppose you want to create a portfolio with an expected return higher than $10\%$ how can you achieve your goal The utility theory says that no matter the situation all investors care only about mean and variance all investors should maximize their expected utility all investors should maximize the risk of their investments because we all know that more risk means higher expected return professional financial analyst are overpaid and useless You invest $72\%$ in the index fund and the rest in T$-$bills what is the volatility of your portfolio