Investment Portfolio Part I:  Index Portfolios and Risk Capacity

Take the Risk Capacity Survey at indexfund.com, read the article about Index Portfolios, and then answer the following questions.

a) When constructing a portfolio, what are the three parameters considered by Modern Portfolio Theory?

b) What would be the percent allocation of the three asset classes for a low risk of 15, a medium risk of 50, and a high risk of 90? (You may choose different risk exposures for the three asset classes.)

c) Click on Fund Daily NAVs (net asset values) at the bottom of the "Risk Return Table" and choose three to five potential assets to include in your portfolio. Explain the reasons for putting these assets into your portfolio, based on the risk capacity. (You will then collect the data each day for these chosen assets to obtain at least 30 data values for each asset.)