Why is expected return a bad idea?

Since the market is volatile and unpredictable, calculating the expected return of a security is more guesswork than definite. So it could cause inaccuracy in the resultant expected return of the overall portfolio. Expected returns do not paint a complete picture, so making investment decisions based on them alone can be dangerous.

What is expected return?

The expected return does not just apply to a single security or asset. It can also be expanded to analyze a portfolio containing many investments. If the expected return for each investment is known, the portfolio's overall expected return is a weighted average of the expected returns of its components.

What is expected return in a portfolio?

In other words, a portfolio's expected return is the weighted average of its individual components' returns. The expected return is usually based on historical data and is therefore not guaranteed. The standard deviation or riskiness of a portfolio is not as straightforward of a calculation as its expected return.