Portfolio Management

Why only efficient portfolios will plot on CML and both efficient and inefficient will plot on SML?

Efficient frontier: the portfolios with the greatest expected return for each level of risk (standard deviation). It coincides with the top portion of the minimum variance frontier, so it coincides, in other words, with all available portfolios that have the lowest standard deviation of all portfolios given a expected return; in here we took only risky assets. The introduction of a risk-free asset changes the Markowitz efficient frontier into a straight line, this is the CML, but it is still is on the efficient frontier.

The SML is the graphical representation of the CAPM that plots expected return versus beta on any security. It shows us the equilibrium (required) return for any security or portfolio based on its beta.

Hope you understood.