A Mean Variance Evaluation of Gradual Disinvestment Strategy

This paper evaluates the theoretical validity of gradual disinvestment mechanism in risky assets depending on age or the distance to retirement, suggested by professional financial planners. In the mean-variance analysis framework, I compare this strategy with another one whose share invested in risky assets remains constant during the life of the investment and equal to the arithmetic average of the portion invested in risky assets in the disinvestment policy. Under the hypothesis of independent and identically distributed assets returns, I show that the constant profile investment strategy has a higher expected return and less risk than the strategy which consists in decreasing risky assets' share.