RT Journal Article
SR Electronic
T1 The Value of a Gamma-Efficient Portfolio
JF The Journal of Retirement
FD Institutional Investor Journals
SP 32
OP 56
DO 10.3905/jor.2018.5.3.032
VO 5
IS 3
A1 David Blanchett
A1 Paul D. Kaplan
YR 2018
UL https://pm-research.com/content/5/3/32.abstract
AB In 2014, the authors introduced gamma, a new metric designed to quantify the value of more intelligent financial planning decisions, with a focus on the potential benefits of working with a financial advisor. This article revisits gamma, but with a relatively narrow scope: to quantify the potential benefits of implementing a gamma-efficient portfolio strategy for an investor; that is, to measure the gamma of investing decisions. We do this using a framework of seven questions an investor should consider during the portfolio construction process. This framework is far more comprehensive than simply selecting a few mutual funds.Based on our empirical tests and existing research, we estimate that the “average” investor is likely to benefit significantly from working with a financial advisor, so long as the advisor provides comprehensive, high-quality portfolio services for a reasonable fee. The potential benefits associated with making better portfolio decisions will vary considerably by investor.TOPICS: Wealth management, portfolio construction, statistical methods