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- Title
Reality check: The implications of applying sustainable withdrawal rate analysis to real world portfolios.
- Authors
Qianqiu Liu; Chang, Rosita P.; De Jong Jr., Jack C.; Robinson, John H.
- Abstract
This paper brings portfolio sustainability research closer to practical application by examining how common practitioner investment and withdrawal strategies impact sustainability. The results suggest that the application of a multiasset portfolio model may improve sustainability success rates relative to simple two-asset models illustrated in previous research, and the advantage becomes more pronounced with higher withdrawal rates and longer time horizons. We also find that a "bonds first" withdrawal strategy appears to be superior to a constant allocation strategy as both time horizon and withdrawal rate rise. Most notably, the results of our analysis suggest that there is no single optimal retirement asset allocation, but rather a continuum of ideal allocations that become increasingly equity-weighted as the investor's required withdrawal rate and/or expected time horizon increase.
- Subjects
PORTFOLIO management (Investments); INVESTMENTS; BONDS (Finance); RETIREMENT planning; ASSET allocation
- Publication
Financial Services Review, 2009, Vol 18, Issue 3, p123
- ISSN
1057-0810
- Publication type
Article