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x-linked actually :-) From Yodaorange, a high quality voice over on the METAR board.

Rob Arnott of Research Affiliates released a significant paper today entitled “The Glidepath Illusion.” [1] Glidepath refers to the conventional asset allocation for retirement saving. Younger savers have a high allocation to equities which slowly “glides down” to a small allocation when retirement starts. This model only has two asset classes: equities and bonds, so the bond allocation rises towards retirement. The rationale for this Glidepath is that bonds are less risky than equities and near-retirees cannot tolerate the equity risk.

Rob decided to question the Glidepath model

more at the link :-)
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phooey! I forgot to add the interesting conclusion:

the INVERSE Glidepath... start with 20 equities/80 bonds when young, and 'glide' to 80 equities/20 bonds as retirement nears had the best results.

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I would not be surprised to find that a constant 80% equity, 20% bond would have provided even better results.

The point of the bond portion of the portfolio is to reduce risk (variability), not increase return. Over long enough periods of times, equities have always beat fixed income investments.

The typical advice for determining investment allocation is to start by determining your own tolerance to risk. If you are going to panic and start shifting money around if your portfolio value falls 20%, then you need to reduce your risk (using bonds) so that you can sustain a stock market drop by that much which is likely to occur during your 30 or so years of portfolio building. If a 50% decline in portfolio value doesn't bother you, you can invest a lot more of your portfolio in equities and still be pretty safe. If you are young, you have a long time horizon for your investments and large declines in the stock market are likely to be recovered before you need the money. If you are 70 and take a 50% hit, you'll probably never recover. You would have been better off with less money but more stability.
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