Goals-based investing frequently treats each goal independently and constructs each corresponding portfolio in isolation. Beyond the possible efficiency losses caused by the self-imposed constraints of a mental accountingoriented bucketing approach, …
Lifecycle models are increasingly popular in financial planning. However, they often overlook the significant risk posed by income shocks—such as career disruptions, economic downturns, or technological advancements—that can affect financial plans, …
Including income risk in financial plans often results in lower equity allocation and higher saving rates.
Financial literacy helps investors recognize when to seek advice—and plan sponsors are well-positioned to provide support in the process.
In the long run, we are all dead. Nonetheless, when studying the short-run dynamics of economic models, it is crucial to consider boundary conditions that govern long-run, forwardlooking behavior, such as transversality conditions. We demonstrate …
We study the accumulation of financial competencies in a model of dynamic skill formation. We find evidence of complementarities between financial literacy and risk attitudes. Risk tolerance facilitates experimentation and learning-by-doing. Latent risk attitudes and financial literacy are unevenly distributed across households and do not align with general human capital. Linking estimates with data on household portfolios, we show that early-life differences in financial literacy may account for more than half of the standard deviation of wealth by age 60. Dynamic complementarities in skill for- mation imply that early interventions could reduce later-life inequality while boosting wealth growth.