Part 2/8:
Imagine if investors possessed a crystal ball capable of predicting the price trajectories of various cryptocurrencies. In reality, however, the market's uncertain nature disallows such foresight. Understanding that no one knows the market's future directions is crucial for an investor. Thus, the emphasis shifts to maximizing expected returns relative to the level of risk assimilated.
To engage with risk-adjusted returns effectively, investors often visualize their portfolios by plotting expected returns against volatility. While historical returns provide a foundation for these predictions, it's important to keep in mind that the reliability of projecting future outcomes based solely on past data can be dubious.