Posted on 9 October 2018
The paper, Reducing Sequence Risk Using Trend Following and the CAPE Ratio, summarised in In Practice Summary: Managing Sequence Risk to Optimize Retirement Income examines approaches for addressing sequence risk in investing funds in retirement– the risk of experiencing bad investment outcomes at the wrong time.
The research team recommend reducing sequence risk by ‘smoothing’ an investment portfolio over time. This is done by investing in assets which are overperforming their rolling average and withdrawing money from those which are underperforming their rolling average and putting the money into cash.
Read the full FT Adviser article: Financial planning literature branded 'naive'.