Practical Applications of Markowitz Portfolios with Graham Bands in the Accumulation Phase

Abstract

Practical Applications Summary In Markowitz Portfolios with Graham Bands in the Accumulation Phase, from the Winter 2019 issue of The Journal of Wealth Management, Paul Hagelstein, Isabella Lackner, James Otto, Austin Perona, and Robert Piziak, all of Baylor University, investigate the historical real returns of two types of portfolios: Markowitz portfolios and Markowitz portfolios with Graham bands. They find that historically, rebalancing never occurred more than once per 30-year period, and that rebalancing more often hurt than helped investor returns. Additionally, they find that investors never rebalanced from bonds into stocks in any of the 30-year periods. The authors conclude by suggesting that investors consider placing their bond allocations into less-liquid investment vehicles, such as the TIAA Traditional annuity, in order to generate greater returns. TOPICS: Portfolio theory, portfolio construction, wealth management