Rob Arnott: Traditional Retirement Portfolio Formulas are Flawed

March 1st, 2014
in econ_news, syndication

Econintersect:  Research Affiliates chairman and CEO Robert D. Arnott and two associates (Katrina F. Sherrard and Lilian Wu) have published a paper in The Journal of Retirement (Fall 2013) which analytically decimates traditional formulas for retirement investing.  Specifically, the paper determines that the rule of thumb for increasing the ratio of bonds:stocks as the investor ages is far from optimal.  Such formulas have been implemented in target-date mutual funds and such funds do not meet the objectives that have been assumed:  (1) maximize the real value of the retirement account; and (2) minimize uncertainty about the prospective income after retirement starts.

Video can be viewed at end of article.
arnott-retirement-portfolio-video-380x200

Follow up:

The paper is described in part of the introduction as follows:

arnott-retirement-investing-findings

The complete paper (pdf) can be read by clicking on the cover page below.  Video can be accessed following the coverpage image.  Note: IIJ website is currently undergoing maintenance.  Link to article will be restored when they come back on line.

arnott-retirement-investing-cover-page

Click on image below to watch video presentation by Rob Arnott at YouTube.

arnott-retirement-portfolio-video

John Lounsbury

Source:

  • Glidepath Illusion ... and Potential Solutions (Robert D. Arnott, Katrina F. Sherrard and Lilian Wu, The Journal of Retirement, Fall 2013) Note: IIJ website is currently undergoing maintenance.  Link to article will be restored when they come back on line.














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