PORTFOLIO SELECTION IN A GOAL-BASED SETTING

PUBLISHER: Journal of Wealth Management
DATE: Fall 2016
DOI: https://doi.org/10.3905/jwm.2016.19.2.041
PDF: Not available due to copyright restrictions

FORMAL ABSTRACT
Using different portfolio ratios, we illustrate the deficiencies of using only modern portfolio theory (MPT) metrics and assumptions when selecting portfolios in a goal-based setting. Through the lenses of the ratios, we show how MPT can choose the “wrong,” albeit efficient, portfolio to accomplish a goal. These facts illustrate the need for goal-based practitioners to factor in other variables, such as time to a goal and maximum loss thresholds, when managing a portfolio to a goal-oriented mandate.

KEYWORDS
Goal-based investing, portfolio management, investing, wealth management