Has Modern Portfolio Theory become obsolete? What alternatives have emerged?

Portfolio Theory
In the 1950's Markowitz developed a theory called Portfolio theory (using the MPT model) which states that when it comes to investing, the more sensible method is to have multiple investments creating a 'portfolio'. The idea being that the risk has now been spread and investments are now sounder and can increase the return on those investments. Using this theory is assuming that investors are risk averse; meaning the investor will always choose the less risky portfolio when given the option of two that give the same return. The theory looks at an assets price change in comparison to other asset price changes in the portfolio and not individually; this comparison allows for an analysis of all the portfolio and identifies which assets are riskiest. A calculation is used on the portfolio of investments to decide on the validity of investing in the portfolio which makes for a clearer and more defined analysis of risk and investment worth.

Challenges
Despite its popularity, receiving a Nobel memorial prize, there have been many in recent years who challenge the theory which begs the question 'is MPT still relevant?'. The main criticism is that MPT states that 'volatility is risk' which some do not believe to be true. For years the theory had been widely accepted, however the financial crisis threw up some interesting results concerning what would have been seen to be a placid asset in terms of its volatility; which suddenly lost all its value. Using the MPT model, these assets would have been viewed as less risky than most and would have continued to encourage investment, so long as the investment return was sufficient. Another point made by critics is that there has never been any proven correlation between risk (as volatility) and return; cannot prove that high volatility gives better results and low volatility produces lesser results. Considering that volatility is the main factor in determining whether returns will be high or not according to MPT, this is a major challenge to the theory and is now the reason that the theory is questioned so much.

Is it still relevant?
The financial crisis of recent times has been an anomaly that made many question MPT and is perhaps the answer to the question on it's own; whilst years ago MPT was accepted, new scenarios that have appeared in the last decade have proven that MPT does not always work and may now be outdated. In my opinion, for your safe, non-volatile asset to lose all its value during a crisis, is a very devastating blow to the theory and will make investors second guess their use of the theory, perhaps dubbing it behind the times. However, challenging the theory purely based upon the financial crisis is not full-proof and investors must consider that diversification, while not being completely successful, has certainly offered much protection against risk in the past and may have even helped investors make less of a loss in the financial crisis than if diversification had not been employed.

Alternatives to MPT
One alternative to MPT is something called 'timing the market'. This can be seen as common sense among investors; the principle being that you hold an asset when its value is good, giving positive returns and when things start to go 'bad' for the asset you sell. This can return huge gains on an investment as the theory behind it is so obvious and simple; however a major factor in this method is investors almost need a crystal ball to ensure they can predict what will happen to the value of an asset.
Finally, something that must be considered is the idea of 'Black Swans' those assets which appear to be random and by the large majority of the market completely unpredicted. These would appear to make it impossible for the market to measure risk and therefore can any of the theories or practices be reliable enough to use as a motor for investment.

Conclusion 
There is little doubt that MPT has some viable aspects and understands the role that volatility has upon the markets and investments; personally I agree that volatility is risky and must be taken into consideration by all especially since investors are risk adverse. I also think that the financial crisis was an anomaly which could not be predicted or protected against by any theory or practice. Despite this, the financial crisis has definitely proposed some challenges to MPT which any intelligent investor would consider; the main principle of volatility directly correlates to returns has never been conclusively proven and the smallest bit of doubt is enough to make risk adverse investors hesitate. These findings would suggest that MPT has become slightly outdated and there is a good case against the theory, on the other hand, its principles can still be used today and few alternatives have been presented.