Fixed and Dynamic Asset Allocation in the Accumulation Phase
A. Perona and
Journal of Finance and Investment Analysis, 2019, vol. 8, issue 1, 1
In this paper, we consider the historical real returns of fixed and dynamicÂ allocation portfolios consisting of equities and short term bondsÂ over thirty year time horizons, where fixed real contributions are madeÂ to the portfolios annually. In particular, we consider both the scenarioÂ where the investor annually rebalances a portfolio to a fixed ratio asÂ well as the scenario where the investorâ€™s annual contribution has a fixedratio but the portfolio is never subsequently rebalanced. These resultsÂ provide investors in the accumulation phase historical data that mayÂ provide a useful guide to asset allocation decisions. Of particular interestÂ is that, over the 88 thirty-year time intervals considered, dynamicÂ allocation portfolios had a better overall performance than fixed allocationÂ portfolios, and that both fixed and dynamic allocation portfoliosÂ strongly benefited from a heavy equity exposure.JEL classification numbers: G11; N21; N22Keywords: portfolio allocation; historical returns; accumulation phase
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