Abstract
This article examines two ways of pension allocation, choosing the best opportunity mix based on Fama and the French three-factor model to maximize returns while satisfying each portfolio category and other investment conditions. The database used by the author is based on the excess returns of 8 different stocks from October 2018 to January 2022. This article studies the relationship between different stocks by calculating the variance, standard deviation and covariance of different stocks, and divides stocks into large-cap stocks, small-cap stocks, value stocks, and growth stocks. The author calculated the optimal Sharpe ratio. Empirical results show that the sharpe ratio value obtained from the investment portfolio can be concluded that when people live for more than 20 years after retirement, they can choose to receive pensions every year. If your life expectancy after retirement cannot reach 20 years, it is recommended to withdraw your pension in one lump sum. However, this article shows that results change when using different portfolio approaches because of data limitations.
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