Practical Applications of Utilizing Low-Volatility Assets to Mitigate Sequence Risk in Retirement Investing

Practical Applications Summary In Utilizing Low-Volatility Assets to Mitigate Sequence Risk in Retirement Investing, from the August 2019 issue of The Journal of Investing, Wei Ge of Parametric Portfolio Associates investigates the relationship between low-volatility assets and sequence risk in retirement investment portfolios. Ge finds that constructing a 60/40 portfolio in which the 60% growth asset allocation was invested in a low-volatility asset significantly reduced the uncertainty associated with retirement investment outcomes. This reduction in sequence risk was reflected in narrower final wealth ranges and reduced failure rates. Ge suggests that retirement plan managers incorporate low-volatility assets into the portfolios they manage in order to mitigate sequence risk.