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Can Sustainable Withdrawal Rates be Enhanced by Trend Following?

Research output: Contribution to journalArticle

Standard

Can Sustainable Withdrawal Rates be Enhanced by Trend Following? / Clare, Andrew; Seaton, James; Smith, Peter Nigel; Thomas, Stephen.

In: International Journal of Finance and Economics, 21.11.2019.

Research output: Contribution to journalArticle

Harvard

Clare, A, Seaton, J, Smith, PN & Thomas, S 2019, 'Can Sustainable Withdrawal Rates be Enhanced by Trend Following?', International Journal of Finance and Economics. https://doi.org/10.1002/ijfe.1774

APA

Clare, A., Seaton, J., Smith, P. N., & Thomas, S. (2019). Can Sustainable Withdrawal Rates be Enhanced by Trend Following? International Journal of Finance and Economics. https://doi.org/10.1002/ijfe.1774

Vancouver

Clare A, Seaton J, Smith PN, Thomas S. Can Sustainable Withdrawal Rates be Enhanced by Trend Following? International Journal of Finance and Economics. 2019 Nov 21. https://doi.org/10.1002/ijfe.1774

Author

Clare, Andrew ; Seaton, James ; Smith, Peter Nigel ; Thomas, Stephen. / Can Sustainable Withdrawal Rates be Enhanced by Trend Following?. In: International Journal of Finance and Economics. 2019.

Bibtex - Download

@article{53c597fca33f47099cf7da7fb2a5909b,
title = "Can Sustainable Withdrawal Rates be Enhanced by Trend Following?",
abstract = "We examine the consequences of alternative popular investment strategies for the decumulation of funds invested for retirement through a defined contribution pension scheme. We examine in detail the viability of specific {\textquoteleft}safe{\textquoteright} withdrawal rates including the {\textquoteleft}4%-rule{\textquoteright} of Bengen (1994). We find two powerful conclusions. First that smoothing the returns on individual assets by simple trend following techniques is a potent tool to enhance withdrawal rates. Second, we show that while diversification across asset classes does lead to higher withdrawal rates than simple equity/bond portfolios, “smoothing” returns in itself is far more powerful a tool for raising withdrawal rates. In fact, smoothing the popular equity/bond portfolios (such as the 60/40 portfolio) is in itself an excellent and simple solution to constructing a retirement portfolio. Alternatively, trend following enables portfolios to contain more risky assets, and the greater upside they offer, for the same level of overall risk compared to standard portfolios.",
author = "Andrew Clare and James Seaton and Smith, {Peter Nigel} and Stephen Thomas",
note = "{\textcopyright} 2019 John Wiley & Sons, Ltd. This is an author-produced version of the published paper. Uploaded in accordance with the publisher{\textquoteright}s self-archiving policy. Further copying may not be permitted; contact the publisher for details",
year = "2019",
month = nov,
day = "21",
doi = "10.1002/ijfe.1774",
language = "English",
journal = "International Journal of Finance and Economics",
issn = "1076-9307",
publisher = "John Wiley and Sons Ltd",

}

RIS (suitable for import to EndNote) - Download

TY - JOUR

T1 - Can Sustainable Withdrawal Rates be Enhanced by Trend Following?

AU - Clare, Andrew

AU - Seaton, James

AU - Smith, Peter Nigel

AU - Thomas, Stephen

N1 - © 2019 John Wiley & Sons, Ltd. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details

PY - 2019/11/21

Y1 - 2019/11/21

N2 - We examine the consequences of alternative popular investment strategies for the decumulation of funds invested for retirement through a defined contribution pension scheme. We examine in detail the viability of specific ‘safe’ withdrawal rates including the ‘4%-rule’ of Bengen (1994). We find two powerful conclusions. First that smoothing the returns on individual assets by simple trend following techniques is a potent tool to enhance withdrawal rates. Second, we show that while diversification across asset classes does lead to higher withdrawal rates than simple equity/bond portfolios, “smoothing” returns in itself is far more powerful a tool for raising withdrawal rates. In fact, smoothing the popular equity/bond portfolios (such as the 60/40 portfolio) is in itself an excellent and simple solution to constructing a retirement portfolio. Alternatively, trend following enables portfolios to contain more risky assets, and the greater upside they offer, for the same level of overall risk compared to standard portfolios.

AB - We examine the consequences of alternative popular investment strategies for the decumulation of funds invested for retirement through a defined contribution pension scheme. We examine in detail the viability of specific ‘safe’ withdrawal rates including the ‘4%-rule’ of Bengen (1994). We find two powerful conclusions. First that smoothing the returns on individual assets by simple trend following techniques is a potent tool to enhance withdrawal rates. Second, we show that while diversification across asset classes does lead to higher withdrawal rates than simple equity/bond portfolios, “smoothing” returns in itself is far more powerful a tool for raising withdrawal rates. In fact, smoothing the popular equity/bond portfolios (such as the 60/40 portfolio) is in itself an excellent and simple solution to constructing a retirement portfolio. Alternatively, trend following enables portfolios to contain more risky assets, and the greater upside they offer, for the same level of overall risk compared to standard portfolios.

UR - https://authorservices.wiley.com/api/pdf/fullArticle/16590576

U2 - 10.1002/ijfe.1774

DO - 10.1002/ijfe.1774

M3 - Article

JO - International Journal of Finance and Economics

JF - International Journal of Finance and Economics

SN - 1076-9307

ER -