Another factor to add that has not been explicitly mentioned is
switching from low dividend growth stock to high dividend stock with
slower growth. Depending on life expectancy, a history of dividend
increases, and good business prospects to support the dividend payout
rate, are something very much worth considering. Jeremy Siegel's
"Stocks for the Long Run" covers this with an amazing historical
database and is easy reading.

ta1xxx[at]verizon.net writes:

- quote -

Generally, the assumption is that as folks get older and
are more reliant on immediate extraction of spending cash
from their portfolio (and perhaps less concerned with
long-term maximixation of returns), they want less volatility.

It's not really about age, though. It's about risk
tolerance and volatilities. There are some older folks
who have enough assets that they can comfortably ride
out volatility and feel more comfortable with more risk.

- quote -

Again, the main thrust has been that one with respect to
throttling down volatility, and a lower equity allocation
(usually offset by higher cash and fixed-income) does
exactly that.


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

I thought this research was historical.
Economists have the performance of each kind of asset class
for the past century.
You suggest a static or dynamic mix,
a withdrawal strategy,
start it at each historical year,
and see how long/well it lasts.
Some brokers have online programs that do this
for you. They'll tell you what percentage last your
life expectancy and beyond.

Ta1,

Perhaps you could start with the research of Harry Markowitz. He is
largely considered the "Father of Modern Portfolio Theory". He also
won a Nobel prize for his work.

Couple that with the capital asset pricing model, the efficient
frontier, and the risk/return trade-off (which is part of MPT). My
first three suggestions should give you the ground work for
diversification and asset allocation in general. The R/R trade-off
should explain why we adjust our allocations as our situation changes
(aging, retirement, spending goals, etc are all just situational
changes that affect our risk tolerance). I think you will find all of
the underlying assumptions as you learn the theories.

Someone else here may be more aware of empirical studies outside of
Markowitz's and Sharpe's own work. I, offhand, am not.

Good Luck.

On Jan 24, 4:22*pm, ta1...[at]verizon.net wrote:
- quote -

ta1, you are asking a good question.

I have seen a number of asset allocation strategies recommended with
no explanation of the basis for the recommendation.

I believe there are a number of factors:

What is your investment goal?

What is your risk tolerance?

Don't put money in the stock market that you need in five years.

What is your planned withdrawal rate?

My goal has been to have as much spendable income when I retire as
before I retire. That requires assuming risks higher than market risk
for at least part of my portfolio. If I were younger, I would put
maybe 90% in stocks to support my goal. However I am within 5 years
so I need a bond "buffer". My planned withdrawal rate is 5% so to
meet the 5 year rule, I need 25% in bonds.

Frank

I'm looking for a good article (or book, web site, etc) that discusses
changing your asset allocation as you age, approach retirement, etc.

In particular, I'm looking for 2 things:

1. what are the assumptions underlying this idea?

2. What research has been done to examine this idea, what have the
findings been, etc?

It looks to me like there are some underlying assumptions that are
rarely stated explicitly. I'm wondering if they are right, i.e. have
been investigated empirically.

Tnx.