fixed horizon strategy vs. lifestle protention strategy protection

Viceroy

los 18d: Compare lifestyle protection strategies with fixed horizon strategies and explain when the use of each approach is appropriate.

Can anyone explain in plain words?

canadiananalyst

I assume that fixed horizon strategy is appropriate when there is a lump sum liquidity need. For example, you need $100,000 to pay for school.

Disability insurance is an example of lifestyle protection strategy. Recuring liquidity needs.

does that help?

mar350

Lifestyle protection: 1) use absolute performance objectives 2) align invesment process with spending goals 3) tend to underperform in bull market due to lower beta

CF matching: use laddered coupon bonds; best for when goals are expressed using precise cash flow targets

Fixed horizon: use a combination of high quality zero coupon bond that matures near the horizon date and stocks. so in case you need $100,000 for school 10 years later, you buy $100,000 zero coupon bond with 10-year maturity?

lcai

how do you remember this much after 1 year of exam?