Minimum variance portfolio (MVP)
Principles of Finance glossary · Risk, Return & Portfolio Theory
Definition
The portfolio on the efficient frontier with the lowest possible variance.
Minimum variance portfolio (MVP) in plain English
Every investment bounces around in value; 'variance' is just a measure of how wildly it bounces — big swings mean high variance, calm and steady means low variance. The minimum variance portfolio is the specific mix of investments that jiggles the least of any sensible combination you could build. Because different investments often zig when others zag, blending them can cancel out some of the bumps, giving you a smoother ride than any single one alone. It's the 'calmest possible' basket — the go-to choice for someone who cares most about avoiding stomach-churning ups and downs.
Also called: MVP
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