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Risk Management Strategies

In: Investment Strategies for Retirement

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  • Franck Nicolas

Abstract

Both having an efficient SAA that defines the risk at a level we can support to match our investment goal and having a good portfolio construction that diversifies risks are not sufficient to eliminate the risk. Figure 0 shows the impact of volatility at an average of 15% and 8% on a $100,000 portfolio from which income is drawn at $5,000 per annum. With volatility at 15% there is a 40% chance of running out of money by year 25, whereas at 8% volatility the odds of running out of money would be only 25%. We take this level of 25 years because this is when a pure guaranteed portfolio will be itself extinguished (the probability of ruin becomes 100%)…

Suggested Citation

  • Franck Nicolas, 2019. "Risk Management Strategies," World Scientific Book Chapters, in: Investment Strategies for Retirement, chapter 7, pages 195-232, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813272019_0007
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    More about this item

    Keywords

    Retirement Investment Strategies; Pension Financing; Retirement Planning; Personal Finance; Retirement Savings; Asset Management;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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