As investors, we're surrounded by an amazing number of choices. There are thousands of mutual funds, dozens of large mutual fund firms, and scads of small boutique fund firms. In spite of this, building a basic portfolio with products from a single firm is a lot harder than you'd think.

In the building block portfolios introduced earlier, for instance, there are anywhere from two to six funds. We start with a total domestic stock market fund and a Treasury inflation protected securities fund--- the basic Couch Potato. Then we diversify further with a total international stock market fund, an international bond market fund, a REIT fund, and an energy fund.

Should be easy, right?

Well, even starting at Vanguard, the prime mover in index investing, we couldn't get everything from one fund family. To own a non-hedged international bond fund we had to buy American Century International Bond fund because only three international bond funds don't hedge for currency risk. T. Rowe Price has an unhedged international bond fund. PIMCO launched one late last year.

Fortunately, most major firms now offer mutual fund supermarkets. That means we are free to "mix and match" across fund companies. Vanguard has a mutual fund supermarket. American Century International Bond fund is a no-transaction-fee fund in Vanguards' network.

What happens if your account is at Fidelity?

Although Fidelity offers 167 of its own funds, you'll still have to do some fund supermarket shopping. Fidelity offers the Spartan Total Market Index (ticker: FSTMX) with a newly guaranteed low expense ratio of only 0.10 percent on a minimum investment of $15,000. It also offers Spartan International Index (ticker: FSIIX) with the same low expense ratio of 0.10 percent on a minimum investment of $10,000. And it offers Fidelity Inflation Protected Securities (ticker: FINPX), a managed fund with a $2,500 minimum investment.

With those three funds you can have a basic two fund Couch Potato or the three fund Margarita Portfolio.

But you'll have to shop elsewhere for your international bond fund, your REIT fund, and maybe your energy fund. (Fidelity offers an energy fund, Select Energy, ticker: FSENX, but an index fund would be preferable.) Again, that isn't a terrible problem because Fidelity has a very large fund network.

Fortunately, there is a near universal solution, something you can do with virtually any brokerage account. Use exchange traded index funds. If you have a brokerage account anywhere you can get five of the six asset classes as low cost exchange traded funds. Here are the funds.

Total Domestic Stock Fund.   You've got four choices. The iShares Russell 3000 fund, ticker IWV, with an expense ratio of 0.20 percent. The iShares S&P 1500 fund, ticker ISI, with an expense ratio of 0.20 percent. The Dow Jones Total Market Index fund, ticker IYY, with an expense ratio of 0.20 percent. And Vanguard Vipers Total Market Index fund, ticker VTI, with an expense ratio of 0.15 percent.

Treasury Inflation Protected Securities Fund.   Only one choice here, the iShares Lehman TIPS index fund, ticker TIP, with an expense ratio of 0.20 percent.

Total International Stock Fund. Only one choice here as well, the iShares Morgan Stanley EAFE index fund, ticker EFA, with an expense ratio of 0.35 percent.

REIT Fund. There are three choices here. The iShares Dow Jones U.S. Real Estate Index fund, ticker IYR, with an expense ratio of 0.60 percent. The iShares Cohen and Steers Realty Majors Index fund, ticker ICF, with an expense ratio of 0.35 percent. And Vanguard REIT Vipers, ticker VNQ, with an expense ratio of 0.18 percent.

Energy Fund. There are four choices here. Vanguard Energy Vipers, ticker VDE, tracks an index of domestic energy companies and has an expense ratio of 0.28 percent. The iShares S&P Global Energy Index fund, ticker IXC, follows the energy sector of the S&P Global 1200 index and has an expense ratio of 0.65 percent. The iShares Dow Jones U.S. Energy Index fund, ticker IYE, tracks the U.S. energy industry and has an expense ratio of 0.60 percent. And SPDR Energy, ticker XLE, tracks the U.S. energy industry and has an expense ratio of 0.28 percent. Exxon Mobil looms large in each of these funds.

Choose the lower cost funds in this mix and it will cost you less than 0.25 percent to have a diversified index fund portfolio.

What do we do while waiting for an exchange traded fund that invests in an unhedged international bond portfolio? Well, we can continue to buy American Century International Bond fund through fund supermarkets.

We can also visit www.everbank.com and invest in single-country or currency-index CDs.

On the web:

ETF related websites:

ETF Connect.com

Morningstar on ETFs

Yahoo ETF Center

iShares

Amex ETFs

Tuesday, September 30, 2003: Trading through a 401(k)

Sunday, March 20, 2005: Introducing the Couch Potato Building Blocks