The Intelligent Portfolio Practical Wisdom on

The Intelligent Portfolio draws upon the extensive insights of Financial Engines-a leading provider of investment advisory and management services founded by Nobel Prize-winning economist William F. Sharpe-to reveal the time-tested institutional investing techniques that you can use to help improve your investment performance. Throughout these pages, Financial Engines' CIO, Christopher Jones, uses state-of-the-art simulation and optimization methods to demonstrate the often-surprising results of applying modern financial economics to personal investment decisions.

Christopher L. Jones is Chief Investment Officer and Executive Vice President of Investment Management for Financial Engines. Working closely with founder William F. Sharpe, Jones built and led the team of experts in finance, economics, and mathematics that developed the financial methodology for Financial Engines' personalized investment advice and management services. Jones has led the investment management function at Financial Engines for more than a decade. He holds an MS in business technology, an MS in engineering-economic systems, and a BA in quantitative economics, all from Stanford University.

Financial Engines, Inc., is a leading provider of personalized investment advisory and management services to investors in workplace retirement plans. The company provides advisory services to more than 6.8 million employees, including workers at 109 Fortune 500 companies. In addition, Financial Engines manages more than $16 billion in defined contribution assets for individual employees as of year-end 2007. All advisory services are provided by Financial Engines Advisors L.L.C., an independent registered investment advisor and subsidiary of Financial Engines, Inc. Financial Engines does not receive compensation based on the investments it recommends.

Acknowledgments
Introduction to Financial Engines
Making it Personal
A Changing World
The Grand Social Experiment: 401(k
Knowledge Gap
The Traditional Advice Model
Institutional Tools of the Trade
No Free Lunch
I'll Take the One With the Highest Returnà
A Little Bit of Latin: Ex-Ante and Ex-Post
How are the Prices of Risky Assets Set?
The Link between Risk and Return
When High Risk Does Not Mean High Return
Hidden Risks and the Peso Problem
How Much Risk am I Taking?
The Risks and Returns of Different Assets
Does it Pass the Blush Test?
History is Bunk
History and Expected Returns
The Past is Not the Future
History is Sometimes Not What it Seems
Investing with Perfect Hindsight
The Lucky and the Skillful
Evaluating Fund Performance
The Wisdom of the Market
The Efficient Market?
What is the Market Portfolio?
What Does the Market Portfolio Look Like?
There's No Place Like Home
History of the Market Portfolio
Betting Against the Market
Avoiding Unintentional Bets
Risk and the Market Portfolio
The Market's View of Future Returns
Market Portfolio Simulations
Final Thoughts
Getting the Risk Right
How to Measure Risk
Asset Mix and Short-Term Loss
Risk and Portfolio Outcomes
Risk and Time Horizon
Factors to Consider in Selecting a Risk Level
Examples of Informed Investor Behavior
An Unnecessary Gamble
A Different Sort of Beast
The Risk of Individual Stocks
The Implications of Individual Stock Risk
Expected Growth Rates
The Biggest Mistake in 401(k
What about More than One?
Do You Feel Lucky?
How to Do It Safely
Hidden Costs
Dealing with Unwanted Stock Risk
How Fees Eat Your Lunch
It's Basic Arithmetic
Big Business
For Every Winner There Has to Be a Loser
It Still Adds Up to Dollars
A Wide, Wide World
How Fees Eat Your Lunch
It's a Heavy Load to Bear
Fees and the Bigger Picture
Practical Considerations
Smart Diversification
The Goals of Diversification
The Big Picture
Why Hierarchy Is Bad for Portfolios
The Value of Asset Class Diversification
Diversification Ain't What It Used to Be
Diversification and Investment Choices
The Big Picture: Part II
The Search for Better Diversification
Picking the Good Ones
The Stuff That Matters
It's About the Future
Risk Tolerance and Fund Choice
Investment Style
Fund Expenses
Predicting Mutual Fund Performance
Rating Funds
Putting the Pieces Together
What it Takes to Rank Among the Best
Funding the Future
The Benefits of Being Flexible
Taxable and Tax-deferred Savings
How Much Do You Need?
From Wealth to Income
The Myth of Absolutes
Risk, Time, and Savings
What it Takes to Get There
Investing and Uncle Sam
Why You Don't Want to Minimize Taxes
How Taxes Impact Investment Returns
The Impact of Personal Tax Rates
Tax-Efficiency of Asset Classes
Asset Placement
Mutual Fund Tax-Efficiency
Municipal Bonds
Capital Gains and Losses
Putting It All Together
Wrapping It Up
Appendix. Getting Started with the Personal Online Advisor Service
Notes
Glossary
About the Author
Index
Table of Contents provided by Publisher. All Rights Reserved.

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The Intelligent Portfolio Practical Wisdom on Personal Investing from Financial Engines

Summary

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Table of Contents

Supplemental Materials