RT Journal Article
SR Electronic
T1 The Bucket Approach for Retirement: <em>A Suboptimal Behavioral Trick?</em>
JF The Journal of Investing
FD Institutional Investor Journals
SP 54
OP 68
DO 10.3905/joi.2019.1.093
VO 28
IS 5
A1 Javier Estrada
YR 2019
UL https://pm-research.com/content/28/5/54.abstract
AB A bucket approach, which broadly consists of parking a few years of annual withdrawals safely in cash and investing the rest of the portfolio more aggressively, is a popular strategy often recommended by financial planners and typically embraced by retirees. Although this strategy is not devoid of merit, the comprehensive evidence discussed here, from 21 countries over a 115-year period, questions its effectiveness. In fact, simple static strategies, which by definition involve periodic rebalancing, clearly outperform bucket strategies, and they do so based not just on one but on four different ways of assessing performance.TOPICS: Retirement, portfolio construction, performance measurement