The ages where the coefficient seems to fall are also ages where people in conventional, job-based careers are busiest and more involved (mid career). Could it be a case of people paying more attention to their portfolios leading to more loss aversion and worse performance as so many studies have shown before?
This might not be a case of clear cause and effect, but do you think the magnitude of the coefficient plotted over age is correlated to the amount of 'free time' available for the investors?
It’s not just professional duties. We know that people when they get married and have children reduce their risk taking because they now have other responsibilities. I think there definitely is a “there” there.
One could argue that it's natural to take on risk when young and adventurous, and rational to take on risk when old and have little to live for. This explains the smile.
The concept of becoming less risky with age is in itself a flawed concept. A couple in their 60's have a 1:2 to 1:3 chance of making the mid 90's. That's 30 years away!
Making a portfolio conservative with a 30 year timeframe is a flawed thought process. No geared share investments I grant you but a 70/30 portfolio may well be needed if you want more than bread and water, especially in a low interest rate and rising inflation environment, by the time you are 90 or 95. When would such an environment happen anyway....pffff.
Of course when the client runs out of money the adviser will be well retired, I pity any clients if that's the opinion of their adviser.
The ages where the coefficient seems to fall are also ages where people in conventional, job-based careers are busiest and more involved (mid career). Could it be a case of people paying more attention to their portfolios leading to more loss aversion and worse performance as so many studies have shown before?
This might not be a case of clear cause and effect, but do you think the magnitude of the coefficient plotted over age is correlated to the amount of 'free time' available for the investors?
It’s not just professional duties. We know that people when they get married and have children reduce their risk taking because they now have other responsibilities. I think there definitely is a “there” there.
Yep yep, I agree. Thank you for another interesting post, Joachim!
One could argue that it's natural to take on risk when young and adventurous, and rational to take on risk when old and have little to live for. This explains the smile.
Since your phrase that old people have little to live for brought a smile to my face I take it you meant that smile 👍
The concept of becoming less risky with age is in itself a flawed concept. A couple in their 60's have a 1:2 to 1:3 chance of making the mid 90's. That's 30 years away!
Making a portfolio conservative with a 30 year timeframe is a flawed thought process. No geared share investments I grant you but a 70/30 portfolio may well be needed if you want more than bread and water, especially in a low interest rate and rising inflation environment, by the time you are 90 or 95. When would such an environment happen anyway....pffff.
Of course when the client runs out of money the adviser will be well retired, I pity any clients if that's the opinion of their adviser.
Completely agree
FIFO: in a typical three-decade retirement, a fixed income (laden-portfolio) is a fixed outcome: penury!
I like that :-)