The Glide Path
Step 12: Invest & Relax
An investorâ€™s risk exposure is systematically adjusted to risk capacity changes by reducing the allocation from stocks to bonds. This is referred to as a glide path strategy. One effective method to glide path a portfolio is though an approximate 1% reduction in the equity allocation of a portfolio per year over a lifetime.96 When young investors start their careers, they are long on human capital and short on financial capital. As investors age, there is an exchange of human and financial capital. Figure 12-2 is a hypothetical illustration of an individualâ€™s financial glide path (see ifa.com/gp). It illustrates an investorâ€™s transition from living off their labor (human capital) to living off their savings (financial capital) with a slow risk reduction over time. Figure 12-2
Published on Jun 1, 2015
This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...