A portfolio of risky securities can reduce the overall risk

Combining uncorrelated assets is the basic way to reduce risk in a portfolio. The idea is that different classes of assets
tend to move in different directions so that taking risk in one asset has uncorrelated assets that are charting in a
different directions.

Growth stocks are considered riskier than value stocks. Both are determined by price to book and/or price to earnings
ratios and investor insight into trends or auspicious news.

The Markowitz Portfolio Selection Model

The steps involved in portfolio construction when considering the case of many risky securities and a riskfree asset
can be generalized as follows:
Step 1: Identify the risk-return combinations available from the set of risky assets.

Step 2: Identify the optimal portfolio of risky assets by finding the portfolio weights that result in the steepest CAL.
Step 3: Choose an appropriate complete portfolio by mixing the risk free asset with the optimal risky portfolio.

In addition, some common means of holding riskier assets may allow more reward such as using levered ETFs.