Vanguard Commentary: Vanguard’s Life-Cycle Investing Model

A new paper describes the Vanguard Lifetime-Cycle Investing Model (VLCM), a proprietary model for glide-route construction that can aid in the development of custom made financial commitment portfolios for retirement as perfectly as nonretirement objectives. Its utility-centered framework incorporates behavioral finance criteria this kind of as loss aversion and money shortfall aversion to appraise danger-return trade-offs of numerous asset allocation possibilities and analyzes the chance of good results and odds of money sufficiency.

Based mostly on VLCM’s framework, we find that hazard-aversion ranges are the dominant issue powering the wide inventory-bond split in the glide path, impacting the two glide-route slope and ending allocation.

Browse the whole paper below.