Asset Allocation DeMystified

chapter 7

Alternative Approaches and Assets

Conventional asset allocation theory holds that since you age gradually over time, and since your time horizon and risk tolerance are apt to lessen gradually as well, your asset allocation decisions should follow a gentle downward trajectory—a “glide path,” if you will—as if it were an airplane that begins its journey above the clouds at the 30,000-foot level and then gradually descends toward an eventual landing well into retirement. In fact, target date life-cycle funds, which help investors automate their asset allocation planning (and which will be discussed in Chapter 9), have literally turned to describing their changing asset allocation patterns as a gentle glide path that begins from one’s ...