Glide path

Level 3 · Advanced

Read firstTime horizon · Human capital · Diversification

A glide path is a predetermined schedule for shifting a portfolio's asset allocation over time, usually moving from more stocks toward more bonds as a target date approaches. It converts a vague "get safer as retirement nears" intuition into a specific, pre-set rule, most often built into target-date and lifecycle investment funds rather than decided fund-by-fund.

Why it matters

A saver's time horizon (the length of time until the money is needed) shrinks by one year every year, and human capital (the future earning power still owed to a working person) typically declines as retirement nears — both arguments for holding fewer stocks and more bonds over time. A glide path operationalizes that shift: it uses diversification across asset classes as the lever, moving the mix along a schedule instead of leaving the split to be reconsidered from scratch each year.

Because the schedule is fixed in advance, a glide path also removes one source of that-day market judgment from the equation — the allocation on any given date is a function of years remaining, not of what markets did last week.

Worked example

An illustrative target-date glide path. Illustrative allocations only — actual fund glide paths vary by provider and are not recommended here.

Years to target date	Illustrative equity share	Illustrative bond share
35 years (e.g., age 30)	90%	10%
15 years (e.g., age 50)	70%	30%
0 years (e.g., age 65)	40%	60%

Applied to a €50,000 portfolio: at 35 years to target, the schedule points to 90% x €50,000 = €45,000 in stocks and €5,000 in bonds. At the target date, the same rule points to 40% x €50,000 = €20,000 in stocks and €30,000 in bonds — the euro balance may have grown or shrunk over those years, but the shares follow the pre-set schedule regardless of the balance's size.

The shift from 90/10 to 40/60 is not one lump-sum reallocation on a single day; it happens gradually across the years in between, which is what separates a glide path from a one-time rebalancing decision.

Check yourself

Which of the following best describes a glide path?

A rule for buying more stocks whenever the market drops sharplyA predetermined schedule that shifts a portfolio's stock-to-bond mix over time, usually toward more bonds as a target date nearsA guarantee that a fund's value will never fall before the target dateA fixed once-off swap from all stocks to all bonds on the target date itself

A glide path schedule points to a 60% stocks / 40% bonds split at a given point in time. The portfolio is worth €80,000. How many euros does the schedule point to in bonds?

Which of the following are true about how a glide path typically works? Select all that apply.

The equity share generally decreases as the target date gets closerThe allocation on any given date depends on years remaining to the target, not on that day's market newsA shrinking time horizon and declining human capital as retirement nears are both reasons commonly given for the shift toward bondsA glide path only exists in tax-advantaged retirement accounts, never in ordinary investment funds

A saver sells all of their stocks and buys bonds in one transaction, one week before retiring. Is this an example of following a glide path?

Yes, because the portfolio ends up more conservative right before the target date, which is the goal of a glide pathNo, because a glide path is a schedule that shifts the allocation gradually over years, not a single lump-sum reallocation at the end