All individuals need to decide how much to save during their working years, how much to spend during retirement, and the asset allocation of their portfolio in both periods. A portfolio's exposure to stocks and bonds affects key variables, such as the probability of portfolio failure, the degree...

Small-cap stocks are typically viewed as riskier than large-cap stocks, and value stocks as riskier than growth stocks. But are they? It depends, both on an investor's holding period and the way he assesses risk. If an investor is concerned with volatility, either during or at the end of the...

Target-date funds have become a core product for investors saving for retirement. These funds periodically reduce their allocation to stocks, and increase their allocation to bonds and cash, thus becoming more conservative as retirement approaches. This lifecycle strategy implies that investors...

The time diversification controversy, one of the most contentious issues in asset allocation, refers to the relationship between risk and the holding period. One of the aspects of this controversy is related to whether stocks become more or less risky than bonds as the holding period lengthens....

Portfolios can be optimized in a wide variety of ways, depending on the definition of risk and the goal stated. Although the traditional criterion of maximizing a portfolio's Sharpe ratio remains the standard, many other alternatives exist and are currently used by practitioners. One of those...

Academics and practitioners usually optimize portfolios on the basis of mean and variance. They set the goal of maximizing risk-adjusted returns measured by the Sharpe ratio and thus determine their optimal exposures to the assets considered. However, there is an alternative criterion that has...

Planning for retirement, particularly during the accumulation period, largely consists of setting a target value for the retirement portfolio and implementing a policy aimed at hitting that target. Financial plans are inevitably based on expected returns, which are likely to be different from...

Investors who are about to retire are first and foremost concerned with supporting their spending needs throughout retirement. But they also derive satisfaction from growing their wealth beyond what is needed to support consumption in order to leave a bequest to their heirs or chosen charities....

A bucket approach, which broadly consists of parking a few years of annual withdrawals safely in cash and investing the rest of the portfolio more aggressively, is a popular strategy often recommended by financial planners and typically embraced by retirees. Although this strategy is not devoid...

Financial planners are keenly aware of, and routinely warn clients about, sequence risk; that is, the possibility of facing a sequence of low returns early in retirement that may force retirees to scale down the plans they had made. This really is a scary scenario, but one that the evidence here...