yuhsing45/Introduction-of-Target-Date-Fund-and-Analysis-of-Shortfall-Risk-Using-Monte-Carlo-Simulation
Target-date funds have become an important asset in defined contribution retirement accounts, having gained huge popularity in recent years and now more than 70% of all 401(k) plans offer this option. Given its simplicity and clarity, it could be a satisfactory solution for the average retail investor; however, TDFs may not be the best investment product because it does not take into account factors such as risk aversion and shortfall risk. This project firstly presents a thorough introduction of target-date funds (TDFs) and the comparison between TDFs and traditional mutual funds. Next, we explore the core concept of the glidepath and examine the shortfall risk under different scenarios. The purpose of this project is to optimize an existing declining glide path informed by market environment analysis. Moreover, we also implement the reinforcement learning-based life-time portfolio selection method to develop an entirely new glide path that considers varying market scenarios.