Salil Mehta, CFA, is a former leader of the US Treasury/TARP's analytics team as well as PBGC’s policy, research, and analysis, and their first risk analysis function. He serves as an adjunct professor of statistics at Georgetown University, on the board of the American Statistical Association's peer-reviewed journal, and on BlackRock's FutureAdvisor council. Mehta is the creator of the Statistical Ideas blog and the author of Statistics Topics.
Despite Wall Street expectations that the S&P 500 would rise 8% in 2016, the index fell 7% in December and January. Five points of that decline came in January alone. But January’s slide was only just greater than one standard deviation move. As we’ll see, one month can handily destroy expectations going forward.
What is the optimal amount of risk a client should have in their portfolio throughout their career? This is not an easy question to answer, so it is not surprising that there are many different responses. Target date funds (TDFs) are, in theory, simple products that allow clients to focus on a single question: “How old am I?”