Dynamic Portfolio Allocation in Goals-Based Wealth Management

28 Pages Posted: 31 Jul 2018

See all articles by Sanjiv Ranjan Das

Sanjiv Ranjan Das

Santa Clara University - Leavey School of Business

Daniel N Ostrov

Santa Clara University

Anand Radhakrishnan

Franklin Templeton Investments

Deep Srivastav

Franklin Templeton Investments

Date Written: July 07, 2018

Abstract

Given any set of exogenously provided efficient portfolios, we develop a dynamic programming algorithm that constructs an optimal portfolio trading strategy to maximize the probability of attaining an investor’s specified goal wealth at the end of a designated timeframe. Our algorithm can also accommodate periodic infusions or withdrawals of any size with no degradation in runtime performance. We explore how the terminal wealth distribution is sensitive to restrictions on the segment of the portfolio’s efficient frontier made available to the investor. Because our algorithm’s optimal strategy is on the efficient frontier, allowed to depend on the investor’s wealth, and allowed to depend on the investor’s individual goals and specifications, we show that it soundly beats the performance of target date funds for attaining investors’ goals. These optimal goals-based wealth management strategies are useful for modern day FinTech offerings, both advisor-driven or robo-driven.

Keywords: Dynamic asset allocation, goals, FinTech

JEL Classification: G11, C61

Suggested Citation

Das, Sanjiv Ranjan and Ostrov, Daniel N and Radhakrishnan, Anand and Srivastav, Deep, Dynamic Portfolio Allocation in Goals-Based Wealth Management (July 07, 2018). Available at SSRN: https://ssrn.com/abstract=3211951 or http://dx.doi.org/10.2139/ssrn.3211951

Sanjiv Ranjan Das (Contact Author)

Santa Clara University - Leavey School of Business ( email )

Department of Finance
316M Lucas Hall
Santa Clara, CA 95053
United States

HOME PAGE: http://algo.scu.edu/~sanjivdas/

Daniel N Ostrov

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
4085544551 (Phone)
4085544551 (Fax)

Anand Radhakrishnan

Franklin Templeton Investments ( email )

Multi Asset Strategies
P.O. Box 997152
San Mateo, CA 95899-7152
United States

Deep Srivastav

Franklin Templeton Investments ( email )

Multi Asset Strategies
P.O. Box 997152
San Mateo, CA 95899-7152
United States

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