A glide path automates the intuition that risk capacity falls as the horizon shortens. At 30 you can wait out a decade-long drawdown; at 68, drawing an income, you cannot. So equity weight declines on a schedule as the target date nears.
The design question is how steep the descent is and where it stops. A path that lands at 30% equities protects against sequence risk near retirement but may leave too little growth for a retirement that lasts thirty years. There is no free option here — only a choice about which risk to carry.
A more recent variant is the rising equity glide path, which reduces equity into retirement and then increases it again through the early retirement years. The logic is that sequence risk is concentrated in the first decade, so that is where the defensiveness belongs.
Glide paths are worth testing rather than accepting. Running one against a static allocation on identical markets shows exactly what the automation costs in expected terms and what it buys in the bad tail.
Research on this
See also
- Asset allocation — The split of a portfolio across asset classes — equities, bonds, cash, and others — which is the primary determinant of both its expected return and its volatility.
- Sequence of returns risk — The risk that the order in which investment returns arrive damages a plan, even when the average return is unchanged. It matters most when money is being withdrawn.
- Rebalancing — Periodically selling what has grown and buying what has lagged to return a portfolio to its target asset allocation.