Abstract
Using the data of stock, commodity and bond indexes from 2002 to November 2010, this research was carried out by employing Bootstrapping Simulation technique to find an optimal portfolio (portfolio optimization) for retirement, and the effect of diversification based on increased length of investment period (time diversification) with respect to the lengths of retirement investment period and the amounts required for spending after retirement in various occasions. The study analyzed for an optimal allocation of common stock, commodity and government bond to achieve the target rate of return for retirement by minimizing the portfolio risk as measured from the standard deviation. Apart from the standard deviation of the rate of return of the investment portfolio, this study also viewed the risk based on the Value at Risk concept to study the downside risk of the investment portfolio for retirement.
Highlights
Nowadays the structure of Thai society is one with a growing proportion of the elderly
Using the data of stock, commodity and bond indexes from 2002 to November 2010, this research was carried out by employing Bootstrapping Simulation technique to find an optimal portfolio for retirement, and the effect of diversification based on increased length of investment period with respect to the lengths of retirement investment period and the amounts required for spending after retirement in various occasions
For the reason that in randomization, the rate of return of Stock Exchange of Thailand total return index (SET TRI), RICI® and BOND TRI in the same month has been used, the outcome of Bootstrapping Simulation run has already taken into account the relationship among SET TRI, RICI® and BOND TRI rate of return, which is readily reflected in the correlation coefficients of this simulation run
Summary
Nowadays the structure of Thai society is one with a growing proportion of the elderly. The government devised a policy to push for saving fund establishment in the form of retirement saving fund on the grounds that, in the long run, the elderly with neither money nor security shall become a burden to family members while governmental welfare might not be thoroughly accessible For this reason, the Thai society should place importance on the systematic, conventional, and consistent long term investment and saving system especially during its working years, where it should start to save and invest through funds or investment and saving systems under expert supervision in order to be able to manage its investment for generating income stream during retirement efficiently. Apart from the standard deviation of the rate of return of the investment portfolio, this study viewed the risk based on the Value at Risk concept to study the downside risk of the investment portfolio for retirement
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