Date of Award

3-2004

Document Type

Thesis

Degree Name

Master of Science in Engineering Management

Department

Department of Systems Engineering and Management

First Advisor

Alfred E. Thal, Jr., PhD

Abstract

The Thrift Savings Plan is-the defined contribution retirement plan for federal government employees. It is one of the largest retirement plans in the United States. The plan offers five different investment options: two funds concentrate on government securities and corporate bonds, two funds span the United States stock market, and one fund focuses on international stocks. These funds give investors the opportunity to diversify among a wide range of securities. This thesis examines the funds offered by the plan and creates a portfolio selection tool that uses investor inputs. The tool uses three mathematical models: optimization, based on Markowitz's (1952) Modern Portfolio Theory; simulation, based on the combination of optimization results and investor profiles; and selection, based on the simulation results and investor preferences. Results are presented for four investors. Other investors can use these results to gain insight, but the greatest benefit is derived from individual implementation. The tool requires only a few user inputs, and it can be operated without any external assistance. The research has further found that one investment option should not be part of any portfolio, and some portfolios can be risky to individuals for differing reasons.

AFIT Designator

AFIT-GEM-ENV-04M-02

DTIC Accession Number

ADA422578

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