Abstract
What is the best asset allocation scheme for retirement investing and wealth accumulation? The authors examine seven schemes, including the “110 minus age” rule of thumb and strategies employed by popular retirement mutual funds. Historically, the 100% equity portfolio has offered the highest returns with little extra risk. However, if the authors lower equity premiums or bootstrap historical results, then retirement mutual funds and the “110 minus age“ rule of thumb perform somewhat better than 100% equity portfolios in adverse circumstances. But overall, a 100% equity portfolio provides the highest wealth accumulation.
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