{"id":1696,"date":"2012-01-05T11:36:32","date_gmt":"2012-01-05T19:36:32","guid":{"rendered":"\/blog\/?p=1696"},"modified":"2022-01-11T17:12:46","modified_gmt":"2022-01-12T01:12:46","slug":"diversified-investment-portfolio-etfs","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/","title":{"rendered":"How To Build An Investment Portfolio With ETFs"},"content":{"rendered":"<p>Many investors are shifting their allegiance from mutual funds to ETFs. ETFs offer more transparency and, almost always, lower fees than mutual funds.<\/p>\n<p>The question for the thinking investor is how to combine ETFs to build a portfolio that makes sense \u2013 meaning, one that has the best chance of achieving the returns you want, with a level of risk you can stand. Wealthfront recently created a slide show presentation, which we show to various companies around Silicon Valley through our <a title=\"Wealthfront Investing Seminars\" href=\"https:\/\/www.wealthfront.com\/seminars\" target=\"_blank\" rel=\"noopener\">seminar program<\/a>, offering a primer in how to use Modern Portfolio Theory to combine ETFs. We hope that watching it helps you put your own diversified portfolio together, or enables you to ask an investment advisor better questions.<\/p>\n<div id=\"__ss_10659371\" style=\"width: 425px;\"><strong style=\"margin: 12px 0 4px;\"><a title=\"Engineer Your Portfolio with ETFs\" href=\"http:\/\/www.slideshare.net\/wealthfront\/engineering-your-portfolio-with-etfs\" target=\"_blank\" rel=\"noopener\">Engineer Your Portfolio with ETFs<\/a><\/strong> <iframe loading=\"lazy\" style=\"border: 1px solid #CCC; border-width: 1px 1px 0;\" src=\"http:\/\/www.slideshare.net\/slideshow\/embed_code\/10659371\" width=\"425\" height=\"355\" frameborder=\"0\" scrolling=\"no\"><\/iframe><\/div>\n<p>The slide show complements our <a title=\"Online financial advisor Wealthfront's whitepaper\" href=\"https:\/\/research.wealthfront.com\/whitepapers\/investment-methodology\/\" target=\"_blank\" rel=\"noopener\">whitepaper<\/a> on our investing strategy.<\/p>\n<p>A couple of notes on Modern Portfolio Theory \u2013 which most individual investors have heard of, but few have taken the time to understand. Many institutional investors \u2013 the Yale Endowments of the world &#8212; base their investing strategies on Modern Portfolio Theory. <a title=\"Wikipedia on Nobel Prize-winning economist, Harry Markowitz\" href=\"http:\/\/en.wikipedia.org\/wiki\/Harry_Markowitz\" target=\"_blank\" rel=\"noopener\">Harry Markowitz<\/a> introduced the theory in 1952, and in 1990 shared the Nobel Prize in Economics for its development with Merton Miller and William Sharpe, who, along with Wealthfront\u2019s co-founder Andy Rachleff, is a faculty member at Stanford Graduate School of Business.<\/p>\n<p>There has been a lot of work around Modern Portfolio Theory, but basically put, the theory prescribes combining asset classes that have different return, risk and correlation characteristics rather than choosing particular stocks or securities to maximize returns for any level of risk.<\/p>\n<p>Wealthfront uses the <a title=\"Black-Litterman Model for estimating returns and covariances for input to optimization models\" href=\"http:\/\/www.blacklitterman.org\/\" target=\"_blank\" rel=\"noopener\">Black Litterman model<\/a> to estimate the inputs that need to be fed into a mean-variance optimization framework to find the ideal mixture of asset classes for each level of risk. The model is freely available through open source, although you must have at your disposal the data and a software development team that knows how to make it useable. (On another Nobel note, one of the creators of the Black Litterman model was Fischer Black, best known as the co-author of the Black Scholes option pricing model. Mr. Black died too soon to receive the Nobel for his work on the de facto standard for pricing all options; Myron Scholes accepted the prize in 1997. Robert Litterman was Mr. Fischer\u2019s collaborator on the Black Litterman model.)<\/p>\n<p>You might be wondering why we\u2019ve taken so much time to build a slide show that shows you how to construct your own diversified portfolio. Wealthfront offers an online financial advisor service that implements Modern Portfolio Theory and offers continuous monitoring and periodic rebalancing for an advisory fee well below what traditional financial advisors charge- our fee is 0.25% of your assets, with the first $25,000 free.<\/p>\n<p>Our platform never naps, never goes on vacation. We&nbsp;continuously monitor your portfolio&nbsp;and rebalance your investments when necessary, taking known tax implications and trading costs into consideration. Our goal is to ensure the optimal return based on your profile.<\/p>\n<p>We\u2019re building our business with an open-source approach. If you want to <a title=\"Wealthfront.com\" href=\"https:\/\/www.wealthfront.com\/\" target=\"_blank\" rel=\"noopener\">become a client<\/a>, great. If not, we\u2019re happy to help you go do it yourself using our website, our online tools and the information on our blog.<\/p>\n<p>Good luck, and please let us know what you think of us!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many investors are shifting their allegiance from mutual funds to ETFs. ETFs offer more transparency and, almost always, lower fees than mutual funds. The question for the thinking investor is how to combine ETFs to build a portfolio that makes sense \u2013 meaning, one that has the best chance of achieving the returns you want, [&hellip;]<\/p>\n","protected":false},"author":43,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1282],"tags":[1390,1302,1298,1296,1633,1281,1364,1295,1592],"coauthors":[84],"class_list":["post-1696","post","type-post","status-publish","format-standard","hentry","category-investing","tag-asset-allocation","tag-diversification","tag-etfs","tag-fees","tag-harry-markowitz","tag-investing","tag-modern-portfolio-theory","tag-rebalancing","tag-yale-endowment"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How To Build An Investment Portfolio With ETFs | Wealthfront<\/title>\n<meta name=\"description\" content=\"How do you build an investment portfolio using exchange-traded funds, or ETFs?\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How To Build An Investment Portfolio With ETFs | Wealthfront\" \/>\n<meta property=\"og:description\" content=\"How do you build an investment portfolio using exchange-traded funds, or ETFs?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/\" \/>\n<meta property=\"og:site_name\" content=\"Wealthfront Blog\" \/>\n<meta property=\"article:published_time\" content=\"2012-01-05T19:36:32+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-01-12T01:12:46+00:00\" \/>\n<meta name=\"author\" content=\"Elizabeth MacBride\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:site\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Elizabeth MacBride\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/\",\"url\":\"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/\",\"name\":\"How To Build An Investment Portfolio With ETFs | Wealthfront\",\"isPartOf\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\"},\"datePublished\":\"2012-01-05T19:36:32+00:00\",\"dateModified\":\"2022-01-12T01:12:46+00:00\",\"author\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/aa8cbf6479d3cb1839aab268a5051272\"},\"description\":\"How do you build an investment portfolio using exchange-traded funds, or ETFs?\",\"breadcrumb\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/diversified-investment-portfolio-etfs\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/canary.kcprod.info/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"How To Build An Investment Portfolio With ETFs\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\",\"url\":\"https:\/\/canary.kcprod.info/blog\/\",\"name\":\"Wealthfront Blog\",\"description\":\"Personal Finance &amp; 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