Private Wealth

STEPHEN M. HORAN, PhD, CFA, manages professional education and private wealth management content for CFA Institute members. Dr. Horan has served CFA Institute as both an editorial board member and abstractor for the CFA Digest and as an ad-hoc reviewer for the Financial Analysts Journal. He holds a PhD in finance from the State University of New York at Buffalo, publishes frequently in academic and professional journals, and has authored several books. Prior to joining CFA Institute, he was a professor of finance at St. Bonaventure University, principal of Alesco Advisors LLC, and a financial analyst and forensic economist in private practice, providing expert witness testimony and preparing economic impact studies.

• Foreword ixIntroduction 1Part I: Life-Cycle Investing Chapter 1Chapter 1 The Future of Retirement Planning 7Robert C. MertonReprinted from The Future of Life-Cycle Saving and Investing, The Research Foundation of CFA Institute (October 2007):5–18.Chapter 2 Is Personal Finance a Science? 19Paul A. SamuelsonReprinted from The Future of Life-Cycle Saving and Investing, The Research Foundation of CFA Institute (October 2007):1–4.Chapter 3 Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance 23Roger G. Ibbotson; Moshe A. Milevsky; Peng Chen, CFA; and Kevin X. ZhuReprinted from The Research Foundation of CFA Institute (April 2007).Chapter 4 The Theory of Optimal Life-Cycle Saving and Investing 99Zvi Bodie, Jonathan Treussard, and Paul WillenReprinted from The Future of Life-Cycle Saving and Investing, The Research Foundation of CFA Institute (October 2007):19–37.Chapter 5 Is Conventional Financial Planning Good for Your Financial Health? 117Laurence J. KotlikoffReprinted from The Future of Life-Cycle Saving and Investing, The Research Foundation of CFA Institute (October 2007):55–71.Chapter 6 The Life Care Annuity 133Mark J. WarshawskyReprinted from The Future of Life-Cycle Saving and Investing, The Research Foundation of CFA Institute (October 2007):103–106.Chapter 7 The Longevity Annuity: An Annuity for Everyone? 137Jason S. ScottReprinted from the Financial Analysts Journal (January/February 2008):40–48.Chapter 8 A Sustainable Spending Rate without Simulation 151Moshe A. Milevsky and Chris RobinsonReprinted from the Financial Analysts Journal (November/December 2005): 89–100.Chapter 9 Asset Allocation without Unobservable Parameters 169Michael StutzerReprinted from the Financial Analysts Journal (September/October 2004):38–51.Part II: Investment Management for Taxable Private ClientsChapter 10 Investment Management for Taxable Private Investors 191Jarrod Wilcox, CFA; Jeffrey E. Horvitz; and Dan diBartolomeoReprinted from The Research Foundation of CFA Institute (January 2006).Chapter 11 Core/Satellite Strategies for the High-Net-Worth Investor 299Clifford H. Quisenberry, CFAReprinted from CFA Institute Conference Proceedings Quarterly (December 2006):38–45.Chapter 12 The Higher Equity Risk Premium Created by Taxation 311Martin L. LeibowitzModified from the Financial Analysts Journal (September/October 2003):28–31.Chapter 13 Tax Deferral and Tax-Loss Harvesting 317Jeffrey E. HorvitzReprinted from CFA Institute Conference Proceedings: Wealth Management (October 2005):24–30.Chapter 14 Tax Management, Loss Harvesting, and HIFO Accounting 327Andrew L. Berkin and Jia YeReprinted from the Financial Analysts Journal (July/August 2003):91–102.Chapter 15 Investing with a Tax-Effi cient Eye 345Robert N. GordonReprinted from CFA Institute Conference Proceedings: Wealth Management (October 2005):31–40.Chapter 16 Diversifying Concentrated Holdings 361Scott D. WelchReprinted from AIMR Conference Proceedings: Investment Counseling for Private Clients III (August 2001):30–35.Chapter 17 Hedging Low-Cost-Basis Stock 373Robert N. GordonReprinted from AIMR Conference Proceedings: Investment Counseling for Private Clients III (August 2001):36–43.Part III: Tax-Efficient Wealth AccumulationChapter 18 Tax-Advantaged Savings Accounts and Tax-Efficient Wealth Accumulation 387Stephen M. Horan, CFAReprinted from The Research Foundation of CFA Institute (June 2005).Chapter 19 After-Tax Asset Allocation 475William Reichenstein, CFAReprinted from the Financial Analysts Journal (July/August 2006):14–19.Chapter 20 Withdrawal Location with Progressive Tax Rates 485Stephen M. Horan, CFAReprinted from the Financial Analysts Journal (November/December 2006):77–87.Part IV: After-Tax Performance MeasurementChapter 21 After-Tax Performance Evaluation 507James M. PoterbaReprinted from AIMR Conference Proceedings: Investment Counseling for Private Clients II (August 2000):58–67.Chapter 22 Taxable Benchmarks: The Complexity Increases 521Lee N. Price, CFAReprinted from AIMR Conference Proceedings: Investment Counseling for Private Clients III (August 2001):54–64.Chapter 23 Explaining After-Tax Mutual Fund Performance 535James D. Peterson; Paul A. Pietranico, CFA; Mark W. Riepe, CFA; and Fran Xu, CFAReprinted from the Financial Analysts Journal (January/February 2002):75–86.About the Contributors 553Index 555