Portfolio Life Cycle
The portfolio life cycle — also known as the 'glide path' — is the principle that your investment risk profile should gradually decrease as you approach your retirement goal. When you are young, with decades ahead, you can tolerate the volatility of an aggressive portfolio (80% equities) in exchange for higher returns. As retirement approaches, the priority shifts: protecting accumulated capital becomes more important than maximising returns.
Key takeaways
- ▸Glide path: your portfolio's risk profile should automatically decrease as you approach your goal
- ▸High risk (>20 years): ~80% equities — maximum growth, high volatility acceptable
- ▸Medium risk (5–15 years): gradual shift towards bonds to protect accumulated capital
- ▸Low risk (<5 years): ~20% equities — stability and protection of retirement wealth
- ▸Target-date pension funds apply the glide path automatically — useful as a reference for DIY portfolios
Estimated value at retirement (2055)
788.134 €
Horizon: 29 years
Total capital contributed
348.000 €
12.000 € / year × 29 years
This simulation is indicative. The risk profile decreases automatically as the retirement year approaches.
Risk profiles
High Risk
80% Equity · 20% Bonds
Medium-High Risk
60% Equity · 40% Bonds
Medium Risk
40% Equity · 60% Bonds
Medium-Low Risk
20% Equity · 80% Bonds
What is the glide path and how does it work?
The glide path is the strategy that defines how the allocation between risky assets (equities) and defensive assets (bonds) changes over time as a function of your time horizon. It is systematically adopted by target-date pension funds and robo-advisors: the further you are from your goal, the more aggressive the portfolio; the closer you get, the more conservative it becomes.
The logic is mathematical: with 25 years ahead, you can afford a 40% market crash because you have time to recover. With 3 years to retirement, the same crash could halve your capital at the worst possible moment. The calculator simulates this automatic risk reduction year by year, showing how estimated value grows faster during aggressive phases and stabilises during defensive phases.
An example: retirement in 2055, €12,000/year contributions
With annual contributions of €12,000 and retirement in 2055 (29 years away), the portfolio spends about 9 years in the high-risk phase (estimated 10% per year), then gradually scales towards more defensive profiles. The result is a growth curve that accelerates in the early years — when returns more than compensate for risk — and flattens in the last 5 years, protecting accumulated capital from market volatility. The estimated value at retirement depends heavily on how many years remain in the high-risk phase: starting earlier makes an enormous difference.
Frequently asked questions
Do I need to rebalance my portfolio manually every year?
Not necessarily every year, but periodically yes. The frequency depends on your strategy: some investors rebalance annually, others only when the allocation deviates more than 5% from the target. DonkyCapital shows you at any moment how far your portfolio has drifted from your target allocation.
What is the difference between a target-date pension fund and a DIY approach?
A target-date fund applies the glide path automatically, but often with higher management costs (0.5–1% per year) and less flexibility. A DIY approach with ETFs lets you replicate the same strategy at much lower costs (0.1–0.3%), but requires discipline and periodic monitoring.
What return should I aim for in the high-risk phase?
An 80% equity / 20% bond portfolio has historically returned between 7% and 9% gross per year. The calculator uses 10% as an optimistic scenario to highlight the compounding effect: for conservative projections, reduce your annual contribution or lower the expected return.
When should I start reducing risk?
The gradual transition should begin at least 15–20 years before your goal. Cutting risk all at once 5 years from retirement is risky: you might do it after a crash, crystallising losses. A gradual year-by-year reduction is always preferable.
Does the glide path apply to goals other than retirement?
Yes. The same principle applies to any long-term goal: buying a house in 10 years, a university fund for your children, FIRE (Financial Independence). The principle is the same: the closer you get to your goal, the more defensive your portfolio should become.
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