Value assignments for December 2019 (final)
cashbox TLT LQD SPY
Momentum Allocations for December 2019 (final)
1st ETF 2. ETF 3. ETF
If a retirement portfolio deviates from its planned path, is it better to reckon with the way back or adjust the plan? In his article of March 2019 titled "Managing to Target: Dynamic Adjustments for Accumulation Strategies", Javier Estrada uses a simple pension portfolio model to compare the results for hold on to the plan (S2P) with 13 dynamic strategies of three types:
- five effective but impractical (EBI) Dynamic Contribution Strategies. EBI1 adds to the portfolio at the end of each year or withdraws from the portfolio to keep it on track. EBI2, EBI3, EBI4 and EBI5 are similar but limit the annual adjustments to a maximum of 5%, 10%, 15% and 20% above or below the previous year's contribution.
- five feasible but limited (FBL) Dynamic Contribution Strategies. FBL1, FBL2, FBL3, FBL4 and FBL5 also contribute to the portfolio at the end of each year, or retire from the portfolio to keep track, but limit the changes to no more than 5%, 10%, 15%, 20% and 50%. (FBL5) above or below first plan contribution, respectively.
- Three dynamic Asset Allocation (AA) Strategies that make portfolio asset allocation more aggressive (conservative) every five years when the portfolio is below (above) the plan. AA1, AA2 and AA3 limit changes in asset class allocations to 10%, 20% and 30%, respectively, compared to five years ago.
Its model portfolio consists of 39 annual contributions over a 40-year period, with an annualized real return of 5% (historical average for 60% equities and 40% bonds) and a target of $ 1 million in retirement. It evaluates the performance of the portfolio over 80 possible periods of 40 years over 118 years. Using the annual real returns (based on the US Consumer Price Index) for the S & P 500 Index and the 10-year US Treasury Notes from 1900 to 2017 he finds that:
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