Build a Better Path Part Two: 3-D Investing

The critical role of the path of returns in portfolio design: In part one, we zoomed across a half century of financial markets chapters to highlight one of investors’ biggest challenges: defending long-horizon portfolios from sequence-of-returns risk.

In this continuation of AB’s Disruptors Series, Build a Better Path, we shift from diagnosis to application by digging into practical, actionable approaches to incorporate sequence-of-returns into portfolio design. Specifically, we will:

• Explore examples of “better betas” across capital markets assets, with an emphasis on their drivers, persistence and portfolio impact
• Discuss the outsized impact of alpha, whether investment or non-investment driven, on the probability of plan success, including key sources
• On the topic of non-investment alpha, investors generally think in terms of post-tax spending levels. We’ll illustrate how tax rates can have a dramatic impact on the probability of plan success and what those implications are
• Retirement plan success simulations forecast thousands of possible outcomes across decades to derive expected success rates. We’ll take this a step further by showing how manipulating key drivers ("the levers") within those future forecasts can provide insights into portfolio construction today