Mutual Fund Corner: What is glide path approach to investing? Experts discuss

Glide path investing is a gradual change in asset mix adjusted closer to the completion of a goal.

In an interview to CNBC-TV18, Kaustubh Belapurkar, Director of Fund Research at Morningstar India, said asset allocation is the key driver of portfolio returns. However, the concept of glide path advocates that investors start moving from the more volatile asset classes to a safer and more conservative asset classes over a period of time, as they start approaching their investment goal dates.

“We have always said that asset allocation is the key driver of portfolio returns and studies have shown that. However, one thing that often gets missed out is that asset allocation is not a static concept, it is an evolving concept. So, it is important to set the context of how your asset allocation would look not just today but for the future too, towards meeting your goals, and that is where the glide path concept becomes very important. So, when you are investing in various asset classes – equity, debt and cash - for a goal which could be retirement or whatever it is 20-30 years down the line, you can start with a very equity-heavy portfolio which is a great long-term asset class but volatile in the short term. But as you go along on your journey, it is important that you start cutting your exposure to equities because there can be events such as the COVID crisis where equity value erosion can happen quite significantly in a very short span of time. So, the glide path essentially advocates that you start moving from the more volatile asset classes to a safer and more conservative asset classes over a period of time.”