Key insights
- An individual investor's analysis of target date fund glide paths, expressing concerns about bond performance and advocating for a focus on specific bond subcategories with higher CAGR, along with the inclusion of real estate and commodities. The analysis excludes digital assets and certain fixed income segments due to subpar performance. This reflects a more active, potentially risk-seeking approach to retirement investing, which, if widely adopted, could reduce demand for traditional bond allocations within retirement accounts.
I got to looking at various Glide Paths from large Fund Families regarding their Asset Allocation. Needless to say, Bond's performance has been lackluster and does not hedge risk like it did in the past. Thus, I am focusing only on Bond's subcategories that have a CAGR above 3% over the last 10 years. Furthermore, not all Glide Path's asset allocations include Real Estate or Commodities (Gold, Silver, Precious Metals).
I do not include Digital Assets (Cryptocurrency) and will not consider them part of my asset allocation. Digital Assets are pure speculation based on an intangible item with no tangible asset backing.
I do not designate the following separate sub-asset categories for Fixed Income due to subpar performance (less than 3% CAGR): Emerging, Global, and International, Long-Term Bonds (Effective Duration 10 Years +), Bank Loans, Government Mortgages - Backed Bonds, and Municipal Bond.
I do not include the following: Fixed Income - Target Maturity, Multi-Sector Bond, Preferred Stock, Securitized Bonds, and Ultrashort Bonds. However, a case could be made to include Ultrashort Bonds.
The following URL link is a picture (JPEG) of the two (02) types of Glide Path that I created:
https://drive.google.com/file/d/1XpLce7K_UszoKkxkkxH-MsRrKfHA3xjM/view?usp=drive_link
The following URL link is a picture (JPEG) that compares various Glide Paths from Large Fund Families to the one (01) that I created:
https://drive.google.com/file/d/1zdRiANL7dfVvSsA8S8pxCuqpnxRFN3s1/view?usp=drive_link
I categorize Conservative Assets in reference to the Asset Class as follows:
Fixed Income: Short Term
Alternative: Gold
I categorize Moderate Assets in reference to the Asset Class as follows:
Equities: USA Large Cap & International
Fixed Income: Intermediate
Alternatives: Real Estate
I categorize Aggressive Assets in reference to the Asset Class as follows:
Equities: USA Small Cap & Emerging
Fixed Income: High Yield & Convertible
Tell me what you think? Is there an Asset Allocation that I should consider? Does the Allocation Percentage make sense? I look forward to your comments.