Investing 101

Lesson 3: New Investment Technology

Lesson 3 Exercise

Time Estimate 60 minutes

Exercise Summary: In this exercise, you'll put Bill Sharpe's Capital Asset Pricing Model (CAPM) into practice. Using your own portfolio, you can use his tool to determine whether you are saving enough money and taking the right amount of risk to meet your long-term goals.

Financial Engines Bill Sharpe, 1990 Nobel Laureate in Economics and co-founder of Financial Engines, makes his tool available for free. There is a quarterly subscription available, but it is not necessary to sign up for this in order to use Financial Engines. You can assess your portfolio for free.

This interactive advisor uses numerous economic scenarios to make certain your retirement investment planning is on the right track. The advisor makes different assumptions about major forces in the economy, such as: inflation, interest rates, and investment returns, to help you determine your plausibility of success in both good and bad market conditions. It takes about five minutes to download the free Java program. Be sure to have all your current mutual fund, stock holdings, and savings data from both inside and outside your retirement portfolio, so you can take full advantage of the advice.

To try out the advisor, go to: http://www.financialengines.com/

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