How to Invest Over the Life Cycle: A Review

33 Pages Posted: 12 Dec 2006

See all articles by Martin Wallmeier

Martin Wallmeier

University of Fribourg - Faculty of Economics and Social Science

Florian Zainhofer

University of Fribourg (Switzerland) - Chair for Financial Management

Date Written: December 2006

Abstract

We analyse the state of the art in the field of life cycle portfolio choice, a recent strand of the literature on intertemporal portfolio selection. Life cycle models are designed to identify optimal savings and portfolio policies over the lifetime of investors. They can help to improve pension schemes by showing how these could be specifically tailored to the individual employee's circumstances to overcome the "one-size-fits-all" philosophy still prevailing in parts of the mandatory retirement savings system. To facilitate comparison, we first describe set-up, solution method and characteristic results for a basic model and then derive a general framework to classify existing contributions. We highlight the models' strengths and weaknesses and assess their ability to resolve existing portfolio puzzles. Lessons from the literature are summarized and promising areas for further research identified.

Keywords: Personal finance, financial planning, life cycle model, portfolio choice

JEL Classification: G11, D14, D91, H55

Suggested Citation

Wallmeier, Martin and Zainhofer, Florian, How to Invest Over the Life Cycle: A Review (December 2006). Available at SSRN: https://ssrn.com/abstract=951167 or http://dx.doi.org/10.2139/ssrn.951167

Martin Wallmeier

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland
+41 26 300 8294 (Phone)

Florian Zainhofer (Contact Author)

University of Fribourg (Switzerland) - Chair for Financial Management ( email )

Fribourg, CH 1700
Switzerland

HOME PAGE: http://www.unifr.ch/finanzmanagement

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