Glide Path
What Is a Glide Path?
A glide path is an investment strategy used in retirement portfolios that gradually shifts the allocation of assets from higher-risk investments toward more conservative investments as the investor approaches retirement.
Glide paths are commonly used in target date funds and retirement investment strategies.
Why It Matters
As retirement approaches, investors often reduce exposure to riskier assets such as stocks and increase allocations to more stable investments such as bonds. This helps protect accumulated savings from major market fluctuations near retirement.
A glide path helps manage investment risk throughout different stages of an investor’s life.
How a Glide Path Works
Early in an investor’s career, the portfolio typically emphasizes growth-oriented investments such as equities.
Over time, the allocation shifts toward:
- bonds
- income-producing assets
- lower-risk investments
This gradual shift is designed to balance long-term growth with risk management as retirement approaches.
Glide Path vs Asset Allocation
- A glide path describes how asset allocation changes over time.
- Asset allocation refers to the mix of investments held at a specific point in time.
FAQs About Glide Paths
Where are glide paths commonly used?
Target date funds often follow glide path strategies.
Why do portfolios become more conservative over time?
Reducing risk helps protect retirement savings.
Do glide paths eliminate investment risk?
No investment strategy completely eliminates risk.
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