Perspectives: Making Investment Choices as Simple as Possible, but not Simpler
Boston University - Department of Finance & Economics
Ziff Brothers Investments - Risk Management
Financial Analysts Journal, Vol. 63, No. 6, pp. 42-47, 2007
Target-date funds (TDFs) for retirement, also known as life-cycle funds, are being offered as a simple solution to the investment task of participants in self-directed retirement plans. A TDF is a "fund of funds" diversified across stocks, bonds, and cash with the feature that the proportion invested in stocks is automatically reduced as time passes. Empirical evidence suggests that a simple TDF strategy would be an improvement over the choices currently made by many uninformed plan participants. This article explores a way to achieve even greater improvement for people who are very risk averse and have high exposure to market risk through their labor.
Keywords: Private Wealth Management, Asset Allocation, Investment Policy Formulation, Portfolio Management, Asset Allocation
Date posted: June 11, 2007