Investment Portfolio Creation

Paper Summary:

This paper explains that investors must consider their age, marital status, short/long-term goals, years to retirement, and most especially, tolerance for risk. The author describes the Efficient Market Theory as stating that financial market prices fully, and virtually, instantaneously reflect all relevant and available information; therefore, the investor should seek to maximize the diversification in his portfolio. The paper recommends and gives details of various Vanguard money market funds. Tables.

Table of Contents
Introduction
Assumptions
General Theoretical Framework
The Efficient Market Theory
Discussion of the Portfolio
Why Vanguard and Not Another Company?
Final Comments on Efficient Markets

From the Paper:

"As the bulk of available capital is invested with Vanguard, the fair question is: Why not another fund company? After all, there are hundreds of fund choices available. And in terms of size, Fidelity certainly ranks among the largest and the most established. The short answer is that Vanguard is probably the only fund company that specifically offers a wide range of funds, which can be categorized as index funds. Also, in keeping with the efficient market theory and passive investment (along with low expense ratios), Vanguard stands out as the premier provider of efficient market-type funds. By contrast, Fidelity only lists eight total index funds: Four-in-One Index Fund, Spartan 500 Index Fund, Spartan Ext market Index, Spartan Intl Index, Spartan Total Market, Index, Spartan U.S. Equity Index, and U.S. Bond Index Fund (Fidelity Index Funds). Furthermore, the expense ratios of all of the above Fidelity funds are in most cases more than double that of Vanguard."

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