For your retirement portfolio (a long-term investment with a horizon of several decades), you are given a set of N mutual funds to choose from, along with access to Treasury securities which offer "risk-free" rates. You have access to these assets' performance history. Below you will answer how you would use knowledge from various parts of this course to allocate your current wealth into a portfolio. Be clear about your assumptions and be explicit about your steps. Please divide your answers into the following three parts:

1. What data do you ideally have to construct your optimal portfolio?

2. Describe how you would use the Markowitz portfolio theory help to allocate your wealth.

3. Would ownership of a house change your approach? Is it irrational from the point of portfolio theory for most Americans to have so much of there savings in a house?

4. What are some potential pitfalls in the above strategy? What additional analyses would you want to carry out to address potential concerns?