Saturday, June 14, 2014

Buttonwood: Pensions à la mode | The Economist

Buttonwood: Pensions à la mode | The Economist: A comparison of pension returns across countries.  This is an exercise in assessing the returns from a standard investment 60% in equities and 40% in bonds.

"The most important thing for the typical worker is to avoid the worst outcome, not aim for the best. Yet, understandably, few feel they have the expertise to allocate their investments accordingly. As a result many opt for what appears to be the safe option in the form of target-date funds (in America) or default funds (in Britain). These funds are certainly a lot better than the choices employees might make if left to their own devices—placing their entire portfolio in cash or in their employer’s shares, for example. Such funds generally follow a “lifestyle approach” in which the bulk of the portfolio is invested in equities when the employee is young and then switched into government bonds as retirement draws near."

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