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Matt Kadnar
James Montier
Martin Tarlie
July 2022
31:01 minutes
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Investing for Retirement: Modelling Your Assets

In this webcast, James Montier and Martin Tarlie discussed the genesis of their latest White Paper, “Investing for Retirement II: Modelling Your Assets – Are Financial Planners Stuck in the 1970s?” We believe an approach to retirement investing that better models and understands how financial markets differ from the outdated academic assumptions of market efficiency and random walks will result in substantially superior portfolios.

Key points:

  • Most out-of-the-box Monte Carlo simulation engines assume asset prices follow a random walk, contrary to current understanding and evidence.
  • This leads to simulations that underestimate long-run bond volatility and overestimate long-run stock volatility, which in turn leads to bond-heavy portfolios and a distorted view of long-run outcomes.
  • Return generating models that account for valuations are consistent with historical observations.
  • Combining these return-generating models with a new definition of risk – not as volatility – but as ‘not having the money you need when you need it lowers the probability of ruin materially.
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Matt Kadnar
James Montier
Martin Tarlie
July 2022
31:01 minutes
Share

Investing for Retirement: Modelling Your Assets

In this webcast, James Montier and Martin Tarlie discussed the genesis of their latest White Paper, “Investing for Retirement II: Modelling Your Assets – Are Financial Planners Stuck in the 1970s?” We believe an approach to retirement investing that better models and understands how financial markets differ from the outdated academic assumptions of market efficiency and random walks will result in substantially superior portfolios.

Key points:

  • Most out-of-the-box Monte Carlo simulation engines assume asset prices follow a random walk, contrary to current understanding and evidence.
  • This leads to simulations that underestimate long-run bond volatility and overestimate long-run stock volatility, which in turn leads to bond-heavy portfolios and a distorted view of long-run outcomes.
  • Return generating models that account for valuations are consistent with historical observations.
  • Combining these return-generating models with a new definition of risk – not as volatility – but as ‘not having the money you need when you need it lowers the probability of ruin materially.

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