Managing Your Own Index Fund Portfolio

The topic of index investing seems to come up quite a bit, now that we are studying finance.

BTW, I used to work for a Wealth Management software company, which specialized in software that did asset allocation and investment selection for the ultra high net worth investor. While learning the ins and outs of the domain (CAPM, Monte Carlo simulation and Markowitz mean variance analysis) I came across a website that was great for the passive investor. The investor that wanted to invest in the true "market portfolio" or something close to it that all the theory from finance has taught us.

Here's the link to the site:
http://www.indexinvestor.com/

The proof is in the pudding: my portfolio is about a 80% stock 20% bond reference allocation, and is diversified into about 12 different index mutual funds and ETFs. You see, I decided to go "passive investor" and not try to beat the market and guess which fund or stock was hot for the upcoming year. And over past five years, I've gotten the expected return for the portfolios I put together (12.8%) after subscribing to the Index Investor website above. My target return was 10%, so it worked out pretty good, even after the market correction a few weeks back. Sure beats those 150 basis points I was paying that dude from Smith-Barney! And it was with a lot less risk.

How did I achieve this? I bailed from Charles Schwab, moved all my taxable money into Brown (lowest transaction costs for ETFs. Note: Brown was recently acquired by E*Trade), and also consolidated my retirement funds into Vanguard, which offers the best selection of no-load index-based mutual funds. I also did a bunch of research on 529 College Saving Funds, and it turns out California's isn't that great but Nevada's is (they use Vanguard). So those of you who have children should consider saving tax-free for college in the Vangard 529 using index mutual funds.

So now I sleep better and night and don't worry about my portfolio. I just worry about school.

-Chairman P