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Wise Money: Using the Endowment Investment Approach to Minimize Volatility and Increase Control by Daniel Wildermuth

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2The Standard Investment Approach

FOR MANY DECADES, A VERY TRADITIONAL INVESTMENT APPROACH has permeated everything from investment advice columns to financial models to standard investment recommendations. The story goes like this: If you are very young, you hold a high percentage of stocks in your portfolio because you can wait out expected volatility. As you move through your career and approach retirement, you add bonds to your portfolio to lessen the volatility and produce more income. The older you get, the more bonds you hold. So simple, so neat.

The only major disagreements with this model center around the percentage of your portfolio placed in bonds. At retirement, many standard recommendations emphasize splitting a portfolio between ...

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