Abstract
Assets should serve a purpose: to fund a lifetime of financial goals. If assets serve the purpose of funding lifetime goals, it naturally follows that optimal lifetime asset allocation should be goals-based and multi-period, requiring customization according to goals, human capital, and risk preference. Ideally, risk preference is defined intuitively for private investors. We present a dynamic asset allocation method based on an intertemporal capital asset pricing model that incorporates these features to produce a goals-based lifecycle glide path—an asset allocation roadmap that optimally funds lifetime consumption goals while adapting to evolving conditions.
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