# Capital Market Line

*Risk & Portfolio — Finicade finance glossary*

The capital market line joins the risk-free asset to the tangency portfolio, showing the best return available at each level of total risk.

The capital market line joins the risk-free asset to the tangency portfolio, showing the best return available at each level of total risk once borrowing and lending are allowed. Its slope is the market's Sharpe ratio. Its conclusion is radical and still contested: every investor should hold the same risky portfolio and adjust risk only by mixing it with cash or leverage, rather than by picking different stocks.

**Also known as:** CML, capital allocation line

**Related terms:** [Efficient Frontier](https://finicade.com/glossary/efficient-frontier), [Sharpe Ratio](https://finicade.com/glossary/sharpe-ratio), [Risk-Free Rate](https://finicade.com/glossary/risk-free-rate), [CAPM (Capital Asset Pricing Model)](https://finicade.com/glossary/capm), [Security Market Line](https://finicade.com/glossary/security-market-line)

**Taught in:** Charter Climb — Building the Efficient Frontier

Source: https://finicade.com/glossary/capital-market-line