PT  - JOURNAL ARTICLE
AU  - Wai Mun Fong
AU  - Zhehan Ong
TI  - Dividends, Profitability, and Lifecycle Investing
AID  - 10.3905/joi.2016.25.2.055
DP  - 2016 May 31
TA  - The Journal of Investing
PG  - 55--63
VI  - 25
IP  - 2
4099  - https://pm-research.com/content/25/2/55.short
4100  - https://pm-research.com/content/25/2/55.full
AB  - This article examines the efficacy of lifecycle investing for building retirement wealth by using bootstrap simulations. Under realistic assumptions about future earnings and savings, investment glidepaths that use broadly diversified market portfolios incur high shortfall or ruin probabilities. Motivated by clean surplus accounting, the authors propose an alternative equity strategy that blends stocks with a high-dividend-yield and high gross–profit-to-asset ratio. We show that this profitable-dividend-yield approach generates far superior median wealth outcomes, significantly lower shortfall risk, and greater resilience in a low-return world.TOPICS: Retirement, simulations, equity portfolio management