ISSN: 2225-8329
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We will try to expand the analysis of assets including labor income in the decisions regarding the accumulation of assets and their allocation. This refers to pension funds and retirement income. Many issues arise in this context. We need to clarify whether future obligations can be covered by contributions from labor income and assets; what fraction of the income must be saved in order to obtain sufficient retirement income; there will be sufficient income and income from pensions at the complete retirement stage; to what extent retirement funds should be engaged in risky assets or which are the relevant factors that determine the upward or downward evolution of assets and the dispersion of capital. The issues mentioned are of a complex political and financial nature. As regards pension and pension funds, in many countries, the tendency is to establish a three-pillar system for pension income: first, a social security system, secondly, a pension fund. related to work and thirdly, a private pension fund. For most of these pillars, saving on labor income, in addition to capital income, has become an important element. Both help reduce the risk and increase the pension income. As we will see, income from work is also important for the problem of wealth growth. This aspect suggests several directions regarding the design of pension funds, as well as the saving and portfolio decisions regarding labor income. Portfolio studies that include labor income are rare. It was emphasized that financial theory should not be used primarily to "hit the market" but to contribute to raising the capital of households. Fund management should be primarily a dynamic diversification, provide provisions against adverse shocks and ensure the accumulation of sufficient wealth for future periods. Traditional mutual funds, as well as insurance schemes and publicly supported pension funds are management tools that address these issues. However, one also needs well-regulated financial institutions to help serve what the financial theory has actually proposed: serving individuals and households with assets and labor income to provide sufficient pension and temperance funding. adverse shocks.
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To cite this article: Anghelache, C., Armeanu, D. S. (2020). The Portfolio Decisions for Assets with Varying Returns over Time and Labor Income, International Journal of Academic Research in Accounting, Finance and Management Sciences 10 (2):111-121.
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