A study by Doug Waggle, professor of finance at the University of West Florida, and Pankaj Agrrawal, Nicolas M. Salgo Professor of Finance at the University of 海角社区, simulated five potential approaches, or glide paths, to assess their performance amid fluctuating stock prices and other uncertainties. Their findings countered the approach that most financial advisers currently recommend. 

Most financial advisors recommend that retirees follow decreasing glide paths, which gradually assume a lower-risk mix of investments over time. A common recommendation is that the percentage of stocks to bonds in a portfolio should equal 100 less their age, meaning someone who is 100 should invest their entire portfolio in bonds. Waggle and Agrrawal鈥檚 study, however, finds that an increasing glide path, which increases the proportion invested in stocks over time, may be optimal for most retirees who can count on Social Security. 

The paper titled 鈥�,鈥� which was published in the Journal of Financial Planning this year, reasoned that investment portfolios are more vulnerable in early retirement, when large losses may threaten their ability to provide lifetime income. A more conservative approach early on reduces retirees鈥� vulnerability to this risk. Furthermore, as an individual progresses through retirement the timeline for their income stream shortens and variables 鈥� like one鈥檚 desired income 鈥� become more certain. Those developments, coupled with the portfolio鈥檚 growth during retirement, frees one to shift to a riskier investment mix that offers greater growth potential. The study鈥檚 authors caution, however, that this strategy is currently not widely accepted by financial advisers, who retirees should work with to develop their investment plans.

The aim of the study, Agrrawal said, was to explore the tradeoffs retirees and financial planners have to make as they choose an investment strategy for a given retirement portfolio. 

The paper also examined the impact of factoring in Social Security payments into the withdrawal plans for their retirement savings. Including guaranteed income in a retiree’s portfolio reduces the amount and importance of an ongoing income stream from investments, which frees them up to focus their portfolio on building wealth. This approach, the study found, particularly benefits risk-averse retirees who wish to leave an inheritance behind as a portfolio that factors in guaranteed income will have higher starting allocations in stock. 

鈥淭he paper takes a break from the classic models of post-retirement asset allocations; the inclusion of Social Security payments has significant implications for the equity-bond mix, utilizing Monte Carlo modeling we find that increasing glide path equity allocations over time is optimal for the retirees wealth function,鈥� Agrrawal said. 

The research by Waggle and Agrrawal used computer models to run thousands of potential scenarios through these paths that accounted for common differences among retirees like guaranteed income, initial savings, risk aversion and whether they wish to leave assets to their heirs. The duo also analyzed how each of the paths 鈥� increasing fast, increasing slow, constant, decreasing slow, decreasing fast 鈥� performed with varying withdrawal rates.

Contact: Erin Miller, erin.miller@maine.edu听

The competition was part of the G.A.M.E. Forum XIII (Global Asset Management Education) held March 21-22 in New York City. During the event, 1,100 students from more than 125 universities interacted with industry leaders and learned best practices in investment strategy.

The annual event also featured a portfolio competition that compared the 2023 performance of student-managed investment funds. Each college investment team submitted its portfolio account statements and asset holdings.

SPIFFY won First Place Undergraduate Value Portfolio in this competition and earned a $1,000 prize. The value style seeks to find undervalued stocks as they generate superior returns in the long run. 

鈥淲e won the first prize in the value category in 2018, and in 2024, we did it again. This is not easy to achieve and a testament to our continued hard work,鈥� said Sebastian Lobe, SPIFFY Advisor, University Foundation Professor of Investment Education and associate professor of finance. 

SPIFFY is a key entrepreneurial venture within the University of 海角社区 Foundation and the largest student club in the 海角社区 Business School. SPIFFY was founded by Bob Strong in 1993 with an initial investment of $200,000. Today, SPIFFY counts over 80 undergraduate members who oversee a portfolio exceeding $4.6 million of assets under management.

The CFA Institute Research Challenge is an annual global competition that offers students intensive training in financial analysis, hands-on mentoring and real-world experience as research analysts.

U海角社区 MBA students Robert Harvey and Daniel Thomas and 海角社区 Business School undergraduate Nicole Pelletier are led by U海角社区 professor of finance Pankaj Agrrawal and industry advisor Michael C. Moore from Bigelow Investment Advisors. 

鈥淭he success with the CFA competition is a testament to our students, their hard work and their excellence,鈥� says Faye Gilbert, executive dean of the 海角社区 Business School and interim dean of the Graduate School of Business. 鈥淭his step toward the national competition is also an indicator of the impact our faculty have on student learning. Dr. Agrrawal invests his time to provide these transformative learning experiences for students in finance and for that, I am grateful. It is also a compelling part of the 海角社区 Business School model to welcome external advisors. We are grateful for the time invested by Michael Moore to work with these learners.鈥�

U海角社区鈥檚 students will compete against 14 other universities from across the U.S. in April, seeking a chance to compete as regional champions in the global finale against international teams from the Americas, Europe, Asia and Sub-Saharan Africa. 

鈥淭he visibility that this brings to the University of 海角社区 and our business school is now at a national and international level,鈥� says Agrrawal, the team鈥檚 mentor. 鈥淚 anticipate a bright future for Robert, Nicole and Daniel, and great success for our MBA and business programs. I am really very happy for the team and it continues to be a privilege to work with them.鈥�