A Sensitivity Analysis of Goal-Oriented Dynamic Asset Allocation Strategies

Abstract

This study employs a two-regime Monte Carlo simulation framework using first-order \(\ell_1\) trend filtering to model historical economic regimes and project future scenarios. It compares two non-goal-oriented strategies—Standard Glide Path (SGP) and Reverse Glide Path (RGP)—against three goal-oriented strategies: Catch-up Glide Path (CGP), Play-safe Glide Path (PGP), and Dynamic Zone Glide Path (DZGP). Key findings reveal that CGP consistently achieves higher median and mean wealth across varying economic scenarios, demonstrating robustness in wealth accumulation despite its higher risk and drawdown ratios. In contrast, PGP and DZGP, though providing lower median wealth, exhibit reduced drawdowns, appealing to more risk-averse investors. The analysis extends to scenarios involving varying underlying economic assumptions, unexpected income losses, and delayed retirement savings start times.