Under modern portfolio theory, what is the main focus when evaluating investment performance?

The main focus of modern portfolio theory is on the overall performance of the entire portfolio. This approach emphasizes the importance of diversification and how the combination of various assets affects the total risk and return of an investment strategy. Instead of analyzing individual investments in isolation, modern portfolio theory advocates for assessing how different assets correlate with one another and their collective impact on achieving the desired return for a given level of risk.

In this framework, the portfolio's performance is evaluated to ensure that it aligns with the investor's risk tolerance and investment goals. By understanding portfolio performance, investors can make informed adjustments to optimize returns while managing risk, illustrating how diversification can lead to more favorable outcomes than the performance of individual assets alone. This holistic perspective is why the overall performance of the entire portfolio is of paramount importance in modern portfolio theory.