I am more than half way through my first speed run of the CFA level 1 material. This chapter discusses portfolio management. In particular, I just read the Markovitz Efficient Frontier. What strikes me most about this chapter is that these mathematical material are presented so matter-of-factly. Recalling in chapter 1, Ethics, the idea of prudence and due diligence was evident. This was exemplified later in the Financial Statement chapter. Methods of drafting balance sheet, income statement, and cash flow statement were presented in excrutiating details before a discussion about ways to analyze them. Just so we can understand the mechanics of it to spot bias, pitfalls, misrepresentation, and outright frauds. In fact, a good portion of the section were reserved for discussing the caveats in financial statement analysis. As boring as it was to sit through the accounting details, that was good prudence and good due diligence. Fast forward to this discussion on Modern Portfolio Theory (MPT), it is simply explained in the text that expected risk of a portfolio with individual asset correlations less than 1 will be less than its weighted average risk. Where are the billboard-sized warnings and neon-red danger signs? Perhaps criticisms of MPT will be discussed later or perhaps I simply missed it with my \~200 pages/day scanning pace (in which case, just ignore me). But if I don't see a caveat lector on MPT in bold, underlined, and boxed fonts later, then I am surely going to be very disappointed. This is a big deal because of the historic events of 2008. In which we witnessed the havoc caused by countless funds that blindedly rely on MPT's validity (i.e. diversification of risks on the naive basis of constant correlations and normally distributed returns), and other risk models, go under. There can be no worse mistake than underestimating your risk in trading. Let me repeat that, there can be no worse mistake than underestimating your risk in trading. Careless use of MPT (not MPT, per se) leads to exactly that. The problem is that people take these financial theories to heart too much without reading the fine prints. Just because it is presented in mathematical formulas does not mean a theory is law. The least the CFA text can do is to broaden financial prudence from not only dissecting financial statements but to encompass other important intellectual matter related to the job too. I am appalled by the fact that thousands of CFA level 1 hopefuls might actually believe that you can always reduce portfolio risk and identify an efficient asset mix from mere correlations and standard deviations (which in and of themselves are flawed in the real world), with no strings attached. "Science is the belief in the ignorance of the experts", Richard Feynman.