Abstract
This article uses portfolios of Vanguard index funds to study the optimal portfolio allocation strategy for long-term investors who are saving for retirement. The optimization, conducted using both a single-index-hybrid model (SIHM) and the Markowitz–Sharpe optimization method, suggests that in the long run, an optimized allocation strategy will yield cumulative returns equivalent to those of a passive allocation strategy with significantly less risk. In addition, the optimized allocation strategy achieves the favorable risk and reward profile using fewer funds than the passive strategy.
- © 2009 Pageant Media Ltd
Don’t have access? Register today to begin unrestricted access to our database of research.