Diversified Investments, Market Returns and Low Transaction Costs: Which is the Best Combination of these Factors?
Ventura, José M.
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The article presents a way to build a diversified portfolio at a cost lower than what most invested service firms and advisors can provide through active fund management. The investment strategy presented consists of selecting the Index that is appropriate for the investment aim and investing the portfolio based on the mix of different indexes that reflect the investor's goal. Since index investing by definition does not select any other security than the one in the index and has to be purchased in the proportion reflected in the index, stock selection is straightforward and management fees are at a low level or even beat the minimum, if competition works.