PT  - JOURNAL ARTICLE
AU  - Tracey McNaughton
AU  - John Piggott
AU  - Sachi Purcal
TI  - Growing Old Gracefully
AID  - 10.3905/jwm.2000.320369
DP  - 2000 Jan 31
TA  - The Journal of Wealth Management
PG  - 20--24
VI  - 2
IP  - 4
4099  - https://pm-research.com/content/2/4/20.short
4100  - https://pm-research.com/content/2/4/20.full
AB  - The authors set out to deal with the question of the relationship between portfolio risk exposure and age, contracting risk constancy with systematic gradual risk reduction. They take issue with a conclusion offered by Paul Samuelson in the Fall 1994 issue of the Journal of Portfolio Management, arguing that his intuitive account of the “escrow” argument for age-phasing is misleading because it ignores the impact of the differential between risky and safe rates of return on the size of the overall accumulation. They explain with a numerical simulation that, far from age-phasing holding in general, the opposite is more likely to be true - escrow is likely to lead an investment strategy in which the proportion in risky assets increases over the life cycle. The age-phasing result will be generated on only a small number of cases where, over a life cycle, safe rates returns. They also demonstrate that for most of us, who accumulate our assets through the working phases of life, financial age-phasing may be a consequence of a savings rule. Financial planners who urge age-phasing may be advocating constant equity exposure after adjusting for the financial portfolio effects of a saving through time.