TY - JOUR T1 - Low-Volatility Assets for Retirement Investing in an Uncertain Future JF - The Journal of Index Investing SP - 102 LP - 111 DO - 10.3905/jii.2017.8.3.102 VL - 8 IS - 3 AU - Wei Ge Y1 - 2017/11/30 UR - https://pm-research.com/content/8/3/102.abstract N2 - Smart beta has been an important investment phenomenon in the past several years. However, some researchers have reservations about the future prospects of smart beta strategies and their application in retirement investing. This article argues that one smart beta factor, the low-volatility premium, may be uniquely suitable for retirement investing because retirement investors’ main concern is the certainty of investment outcomes. This article compares simple portfolios that use both regular equities and low-volatility assets via scenario analysis and Monte Carlo simulations. The study shows that low-volatility assets may indeed deliver better outcomes in both the accumulation and distribution stages of a retirement investor’s life cycle. Investors need to understand the return assumptions of various assets and make investment choices that are consistent with their views. The study also suggests that investors in the distribution stage may benefit significantly from fixed-income annuities. The article concludes by suggesting that both institutional sponsors of defined contribution plans and individual investors consider low-volatility assets as key components of their retirement plans.TOPICS: Analysis of individual factors/risk premia, simulations, retirement, volatility measures ER -