Portfolios for Long-Term Investors

Abstract How should long-term investors form portfolios in our time-varying, multi-factor and friction-filled world? Two conceptual frameworks may help: first, look directly at the stream of payments that a portfolio payout policy can produce. Second, include general equilibrium view markets’ economic purpose, nature investors’ different preferences, risk-taking ability, function equilibrium. These perspectives rationalize some behaviors, suggest substantial revisions to standard theory, help us apply theory way is useful practice.