PT  - JOURNAL ARTICLE
AU  - Jusvin Dhillon
AU  - Antti Ilmanen
AU  - John Liew
TI  - Balancing on the Life Cycle: <em>Target-Date Funds Need Better Diversification</em>
AID  - 10.3905/jpm.2016.42.4.012
DP  - 2016 May 31
TA  - The Journal of Portfolio Management
PG  - 12--27
VI  - 42
IP  - 4
4099  - https://pm-research.com/content/42/4/12.short
4100  - https://pm-research.com/content/42/4/12.full
AB  - Traditional life–cycle strategies have some serious shortcomings. In this article, the authors focus on five of those weaknesses: home bias, inflation sensitivity, concentrated risk, sensitivity to episodes of equity market turbulence, and a lack of highly diversifying alternative strategies. Some of these shortcomings, such as home bias, are easier to fix than others, which may require getting comfortable with financial tools like leverage. Using over 100 years of data, the authors show that embracing financial innovation and addressing these shortcomings could have meaningfully improved historical performance. As life-cycle funds become a bigger part of the investment landscape, the authors argue that it’s becoming increasingly important to utilize more modern investment techniques—many of which have long been part of the institutional investing arsenal.TOPICS: Mutual funds/passive investing/indexing, wealth management