Boost your retirement savings and save money at the same time

From Mark Hulbert at the Times comes an article suggesting that trying to adjust your asset allocation mix as you age is at best useless and at worst counterproductive.

CONVENTIONAL wisdom recommends that investors start with a high allocation of stock in their portfolios when they are young and reduce it as they approach retirement.

That makes intuitive sense: In your 20s, you may be inclined to take bigger risks; in your 60s, you may feel a greater need to protect the wealth you have been able to amass.

But a recent study of real-world portfolio returns, which fluctuate significantly from month to month and year to year, has found that there is no particular advantage in this approach. You would do just as well, with no greater odds of doing poorly, by simply picking an allocation of stocks and bonds that you can live with for a long while and sticking with it.

That is the implication of “Hitting or Missing the Retirement Target: Comparing Contribution and Asset Allocation Schemes of Simulated Portfolios,” by Harold J. Schleef, an economics professor at Lewis & Clark College, and Robert M. Eisinger, an associate professor of political science at that institution. It was published last year in the Financial Services Review, an academic journal.

Here at Hedonic Adjustment, we only link to articles that support our narrow view of the world, and this is no exception. Spending money to hire a portfolio manager to rebalance your portfolio as you age has always been a dubious use of money (since it's so easy to do yourself).

We subscribe to the widely held view that it is asset type (stock, bond, cash, commodity, real estate) rather than asset selection (a particular stock, bond, or mutual fund) that is the primary determinant of performance.