RT Journal Article SR Electronic T1 Portfolio Selection in Goals-Based Wealth
Management JF The Journal of Wealth Management FD Institutional Investor Journals SP 55 OP 65 DO 10.3905/jwm.2011.14.1.055 VO 14 IS 1 A1 Hungjen Wang A1 Anil Suri A1 David Laster A1 Himanshu Almadi YR 2011 UL https://pm-research.com/content/14/1/55.abstract AB The authors propose an incremental step toward combining the insights of modern portfolio theory with some of the propensities documented in the literature on behavioral finance. They develop a goals-based wealth management approach that finds a specific subportfolio to address each of an investor’s goals and then derive the least-cost solution. They relate the closed-form solution for the one-period, two-asset problem to the mean–variance efficient frontier. Consistent with the “lockbox separation”concept proposed by Sharpe, they demonstrate that a multiperiod goal, such as a retirement plan, can be viewed as a collection of single-period problems. Next, they extend their result to a market with many assets, where portfolios are exogenously given. Finally, they illustrate the approach with a case study with multiple asset classes and multiperiod goals.TOPICS: Portfolio theory, in wealth management