Glide Path

Key Highlights

• A Glide Path is an investment strategy that defines how the asset allocation of a portfolio shifts over time, typically becoming more conservative as an investor approaches a specific goal, such as retirement.

• Types of glide paths includes declining, static and rising glide path.

What is Glide Path?

A Glide Path is an investment strategy that defines how the asset allocation of a portfolio shifts over time, typically becoming more conservative as an investor approaches a specific goal, such as retirement. It is most commonly used in target-date funds, retirement plans, and long-term investment strategies to balance growth potential with risk reduction.

How Glide Path Works?

• Early Stage (Growth-Oriented): When the investment horizon is long, portfolios are tilted toward equities and other growth assets to maximize returns.

• Mid Stage (Balanced): As the goal nears, the allocation gradually shifts toward a balance of equities and fixed income.

• Late Stage (Conservative): Close to or during retirement, portfolios are weighted more heavily toward fixed income, cash equivalents, or low-risk assets to preserve capital and generate income.

Types of Glide Paths

• Declining Glide Path: Risk reduces steadily as the target date approaches (most common).

• Static Glide Path: Asset allocation remains unchanged throughout the investment horizon.

• Rising Glide Path: Risk exposure increases later in the investment horizon (less common, sometimes used in retirement decumulation strategies).

Benefits of a Glide Path

• Disciplined Investing: Automates the shift from growth to preservation, reducing emotional decision-making.

• Goal-Oriented: Aligns portfolio strategy with life milestones such as retirement or education funding.

• Risk Management: Lowers exposure to volatility as the investor nears the goal.

Why It Matters in Wealth Management?

A well-structured Glide Path helps investors stay aligned with long-term objectives while reducing the risks of market downturns near critical milestones. For wealth managers, it is an essential tool in retirement planning, ensuring portfolios evolve with client needs, time horizons, and risk tolerance.