Free Wealth Management Guide Building An Effectively Diversified Investment Por

Building an Effectively Diversified
Investment Portfolio
An Educational Resource From
Solid Rock Wealth Management

By Christopher Nolt, LUTCF, Registered Principal, Investment Advisor Representative

Introduction
How you invest your money can mean the difference between living out your dreams or not. That is something to
take very seriously. Unfortunately, the amount of information on investing today is overwhelming and confusing,
making the decision of how to invest wisely very difficult.
With all of the different investment products, strategies and
information, one has to wonder; “is there a proven way to
invest my money today? A prudent strategy that will give
me a good chance of attaining my long-term investment
goals?” The answer to that question is YES and in this
Wealth Guide we will show you that strategy.
With the Nobel Prize winning concepts of Modern Portfolio Theory as our guide, you will learn a step-by-step
process for constructing an effectively diversified investment portfolio using low-cost asset class mutual funds.
You will see how over the last forty years this portfolio
accumulated more than twice the wealth of a portfolio
allocated 60% to the S&P 500 stock index and 40% to
the Barclay’s Government Credit bond index.
If you are serious about achieving your long-term financial goals, this Wealth Guide could be one of the more
important things you ever read.

Academic Research
It’s important to consider the source of information that
your investment strategies are based upon. Unfortunately,
many sources have an agenda behind them. The financial
media, Wall Street and the investment brokerage industry
disseminate information that is often designed to sell
advertising and publications, to move money and to
generate fees and commissions. Once you understand

that these goals don’t line up with your best interests,
you will learn to ignore much of what you hear from the
media and Wall Street.
Another source of investment information comes from
Academia. Academia refers to the people and institutions
dedicated to the activities of teaching and learning, including
research and discovery. This would include schools, colleges
and universities.
Over the past 60 years, academic research has discovered
and established the most effective way to manage money.
By following the steps outlined in this Wealth Guide, you
can benefit from their research.

Modern Portfolio Theory
In 1990, Harry Markowitz, William Sharpe and the late
Merton Miller won the Nobel Prize for economics for their
research on creating investment portfolios. They developed
a mathematically optimal portfolio. Based on a study of
historical investment performance, they re-created the best
combination of asset classes in a portfolio. Markowitz called
this mathematically correct portfolio an efficient portfolio.
His method sought to achieve maximum returns with the
least amount of risk/volatility as measured by standard deviation. The scientific system Markowitz pioneered and which
won the Nobel Prize came to be known as Modern Portfolio
Theory. This investment strategy is now accepted worldwide
as an authoritative blueprint for investing.
Standard Deviation
Standard deviation is a very important concept of investing. Standard deviation measures the volatility of an investment’s return over time. An investment with returns
that vary greatly will have higher standard deviation. In

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