What are "Equity Glide Paths"?

An "Equity Glide Path" is the projected change in the asset allocation of an investment portfolio over time. Often associated with "target date" or "life cycle" funds, there are any number of examples, and most have to do with the ratios of equities to fixed income investments within a portfolio. 

One of the most common is a "Declining Equity Glide Path", which is often known as the 100 minus your age calculation. For example, a 70-yr old have 30% of their portfolio in equities. It is designed to reduce overall exposure to equity risk in the portfolio. This is the most common strategy in the "target" or "longevity" fund universe. 

Another example is a strategic asset allocation which maintains a "Static Equity Glide Path". Such a path attempts to maintain a strict ratio between asset classes, say a 60/40 Equity/Bond ratio, and a re-balancing would occur at set intervals. That re-balancing could occur, for example, after a period of systematic withdrawals depending on  the relative performance of the asset classes. 

So-called "Rising Equity Glide Paths", on the opposite end of the spectrum, are gaining traction in the marketplace.  in this instance, one has a larger portion in fixed income early, with the equity portion becoming more heavily weighted over time.  In such an instance, a bond ladder could be used to meet early retirement needs, while equity exposure would continue to have the benefit of time, creating some "longevity" in the portfolio.  

Each of these strategies requires careful consideration, specifically the rising equity glide path. Given historical market returns, rising life expectancy and the like, a proactive reallocation of assets is worthwhile, but constantly switching approaches entirely is not recommend.