Distinguish between the following: 'Efficient portfolio' and 'optimal portfolio'.

The Markowitz Model analyses the various possible portfolios of the given number of securities and helps in selection of the best or the most efficient portfolio. According to Markowitz Model, investor is mainly concerned with risk & return. For selection of portfolio, various combinations of securities can be made according to their risk & return preferences. An investor will choose his optimal portfolio from the set of portfolios that offer: maximum expected returns for varying levels of risk, and minimum risk for varying levels of returns. Efficient Portfolio: Under portfolio management efficient portfolio is that which lies along the capital market line. A portfolio that provides greatest expected return for a given level of risk or equivalently the lowest risk for a given expected return. These all combinations are plotted on the graph. All portfolios on efficient frontier of the graph are known as efficient portfolios. Optimal Portfolio: Efficient portfolio which is best suited to the risk-return preference of a particular individual investor is an optimum portfolio for the investor. It represents a tangent point of the individual investor's utility function or indifference curve on the efficient frontier. It is the portfolio in which risk-reward combination is such that it yields the maximum return possible under the current and anticipated circumstances.