The Rational Reminder Podcast | Professor Scott Cederburg: Challenging the Status Quo on Lifecycle Asset Allocation | RR 284 @rationalreminder | Uploaded December 2023 | Updated October 2024, 19 hours ago.
Meet with PWL Capital: calendly.com/d/3vm-t2j-h3p
In this episode, we welcome back the esteemed Professor Scott Cederburg, Associate Professor of Finance at the University of Arizona. In this highly anticipated episode, Professor Cederburg revisits the show to delve into his groundbreaking paper on life cycle asset allocation. Professor Cederburg's latest research presents findings that disrupt traditional thinking in the field, prompting a deep dive into the implications of these new insights. In our conversation, we unpack the findings from the paper and how they challenge established norms in retirement planning and asset allocation. We discuss what the new paper adds to the discourse, his approach and methodology, the different assessment criteria used, and the main findings from the paper. We also delve into the different asset allocation strategies assessed, which strategy performed best, aspects that would influence the various strategies, and how to invest for the long term safely. We explore the nuances of stock versus bond returns and the hidden benefits of international diversification. Gain profound insights into the significance of social security, inflation-protected bonds, target date funds, and the repercussions of an all-equity strategy. Comparing his latest paper with prior research on withdrawal rates, Professor Cederburg highlights surprising aspects of the results and provides invaluable takeaways for financial advisors from these cutting-edge findings. Discover how this pioneering work challenges conventional wisdom, reshaping the landscape of retirement planning and investment strategies in this illuminating conversation with Professor Scott Cederburg.
Timestamps:
0:00:00 Intro
0:04:20 The central tenets of lifecycle investing Scott challenges in his paper
0:08:09 What sets Scott's method apart in its ability to challenge the status quo
0:11:24 Scott describes the lifecycle of the household that he modeled
0:16:25 The retirement outcomes did Scott used to evaluate lifecycle asset allocation strategies
0:20:33 Which asset allocation strategies perform best on Scott's evaluation metrics
0:27:40 Which asset allocation strategies perform best in the left tail of outcomes
0:34:22 How important social security is to an all equity portfolio being optimal
0:39:06 How much more a household has to save in a target date fund for retirement consumption to match investing in stocks through the full lifecycle
0:43:13 How much of a risk large intermediate losses actually are for people saving for, and living though, their retirements
0:54:34 The important of return dependencies, like mean reversion in stocks, to Scott's results
1:01:02 Why the observed behavior of retirees, which does more closely follow the traditional lifecycle advice, differs from what is optimal
1:06:07 What is driving the large optimal allocation to domestic stocks
1:11:45 Whether adding additional costs to owning international stocks pushes the optimal home bias further
1:15:28 The aspects of the results that surprised Scott
Links From Today’s Episode:
Professor Scott Cederburg — https://eller.arizona.edu/people/scott-cederburg
Professor Scott Cederburg on LinkedIn — linkedin.com/in/scott-cederburg
Professor Scott Cederburg on Google Scholar — scholar.google.com/citations
Eller College of Management — https://eller.arizona.edu/
Episode 224 — rationalreminder.ca/podcast/224
Episode 250 — rationalreminder.ca/podcast/250
‘Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice’ — dx.doi.org/10.2139/ssrn.4590406
‘The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets’ — dx.doi.org/10.2139/ssrn.4227132
International Diversification Works (Eventually) — doi.org/10.2469/faj.v67.n3.1
‘Stocks for the long run? Evidence from a broad sample of developed markets’ — sciencedirect.com/science/article
Rational Reminder on iTunes — itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — rationalreminder.ca
Rational Reminder on Instagram — instagram.com/rationalreminder
Rational Reminder on X — twitter.com/RationalRemind
Rational Reminder on YouTube — youtube.com/channel
Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — pwlcapital.com/author/benjamin-felix
Benjamin on X — twitter.com/benjaminwfelix
Benjamin on LinkedIn — linkedin.com/in/benjaminwfelix
Cameron Passmore — pwlcapital.com/profile/cameron-passmore
Cameron on X — twitter.com/CameronPassmore
Cameron on LinkedIn — linkedin.com/in/cameronpassmore
Meet with PWL Capital: calendly.com/d/3vm-t2j-h3p
In this episode, we welcome back the esteemed Professor Scott Cederburg, Associate Professor of Finance at the University of Arizona. In this highly anticipated episode, Professor Cederburg revisits the show to delve into his groundbreaking paper on life cycle asset allocation. Professor Cederburg's latest research presents findings that disrupt traditional thinking in the field, prompting a deep dive into the implications of these new insights. In our conversation, we unpack the findings from the paper and how they challenge established norms in retirement planning and asset allocation. We discuss what the new paper adds to the discourse, his approach and methodology, the different assessment criteria used, and the main findings from the paper. We also delve into the different asset allocation strategies assessed, which strategy performed best, aspects that would influence the various strategies, and how to invest for the long term safely. We explore the nuances of stock versus bond returns and the hidden benefits of international diversification. Gain profound insights into the significance of social security, inflation-protected bonds, target date funds, and the repercussions of an all-equity strategy. Comparing his latest paper with prior research on withdrawal rates, Professor Cederburg highlights surprising aspects of the results and provides invaluable takeaways for financial advisors from these cutting-edge findings. Discover how this pioneering work challenges conventional wisdom, reshaping the landscape of retirement planning and investment strategies in this illuminating conversation with Professor Scott Cederburg.
Timestamps:
0:00:00 Intro
0:04:20 The central tenets of lifecycle investing Scott challenges in his paper
0:08:09 What sets Scott's method apart in its ability to challenge the status quo
0:11:24 Scott describes the lifecycle of the household that he modeled
0:16:25 The retirement outcomes did Scott used to evaluate lifecycle asset allocation strategies
0:20:33 Which asset allocation strategies perform best on Scott's evaluation metrics
0:27:40 Which asset allocation strategies perform best in the left tail of outcomes
0:34:22 How important social security is to an all equity portfolio being optimal
0:39:06 How much more a household has to save in a target date fund for retirement consumption to match investing in stocks through the full lifecycle
0:43:13 How much of a risk large intermediate losses actually are for people saving for, and living though, their retirements
0:54:34 The important of return dependencies, like mean reversion in stocks, to Scott's results
1:01:02 Why the observed behavior of retirees, which does more closely follow the traditional lifecycle advice, differs from what is optimal
1:06:07 What is driving the large optimal allocation to domestic stocks
1:11:45 Whether adding additional costs to owning international stocks pushes the optimal home bias further
1:15:28 The aspects of the results that surprised Scott
Links From Today’s Episode:
Professor Scott Cederburg — https://eller.arizona.edu/people/scott-cederburg
Professor Scott Cederburg on LinkedIn — linkedin.com/in/scott-cederburg
Professor Scott Cederburg on Google Scholar — scholar.google.com/citations
Eller College of Management — https://eller.arizona.edu/
Episode 224 — rationalreminder.ca/podcast/224
Episode 250 — rationalreminder.ca/podcast/250
‘Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice’ — dx.doi.org/10.2139/ssrn.4590406
‘The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets’ — dx.doi.org/10.2139/ssrn.4227132
International Diversification Works (Eventually) — doi.org/10.2469/faj.v67.n3.1
‘Stocks for the long run? Evidence from a broad sample of developed markets’ — sciencedirect.com/science/article
Rational Reminder on iTunes — itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — rationalreminder.ca
Rational Reminder on Instagram — instagram.com/rationalreminder
Rational Reminder on X — twitter.com/RationalRemind
Rational Reminder on YouTube — youtube.com/channel
Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — pwlcapital.com/author/benjamin-felix
Benjamin on X — twitter.com/benjaminwfelix
Benjamin on LinkedIn — linkedin.com/in/benjaminwfelix
Cameron Passmore — pwlcapital.com/profile/cameron-passmore
Cameron on X — twitter.com/CameronPassmore
Cameron on LinkedIn — linkedin.com/in/cameronpassmore
