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The Fallacy of Cookie Cutter Asset Allocation: Some Evidence from 'New York's College Savings Program'
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Financial Services Review
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2001-01-01
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10
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In this paper. we establish why ''prefabricated'' asset allocation schemes mandated by some education savings programs might be suboptimal. Then. using the New York's College Savings Program a an example, we simulate and then compare end of period wealth accumulated in both a tax preferred but regimented asset allocation plan, and in a nontax protected plan. We find. first. that the longer the child participates in the plan. the greater the benefit. Second. participants in higher tax brackets derive greater benefits; adherence to prespecified asset allocation for low tax bracket investors often results in return loss that overshadows the tax benefit.
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Spitzer, J. J., & Singh, S. (2001). The fallacy of cookie cutter asset allocation: some evidence from 'New York's College Savings Program'. Financial Services Review , 10 (1-4), 101.
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@ 2001 Elsevier Science Inc. All rights reserved .