A glide path, in financial and investment contexts, typically refers to a predetermined plan or strategy that outlines the gradual adjustment of asset allocation over time. This strategy is commonly used in retirement planning, target-date funds, and risk management. The goal of a glide path is to manage investment risk by adjusting the portfolio’s composition as an individual or institution approaches a specific financial goal or time horizon.

Here are a few contexts in which the term “glide path” is commonly used:

1. **Retirement Planning:**
– **Pre-Retirement:** In the years leading up to retirement, a glide path might involve gradually shifting the allocation of assets from higher-risk investments (such as stocks) to lower-risk investments (such as bonds or cash) to protect accumulated wealth and reduce exposure to market volatility.

– **Post-Retirement:** After retirement, the glide path may continue to adjust the portfolio to balance the need for income with the preservation of capital. This often involves a continued shift towards more conservative investments to reduce exposure to market fluctuations.

2. **Target-Date Funds:**
– Target-date funds are investment vehicles designed to align with an investor’s anticipated retirement date. These funds automatically adjust their asset allocation over time, becoming more conservative as the target date approaches. The glide path for a target-date fund is built into its structure and is meant to reflect the changing risk tolerance and investment needs of the investor.

3. **Risk Management:**
– In risk management, a glide path may refer to a predefined strategy for reducing exposure to a particular risk over time. For example, in the context of interest rate risk, a financial institution may have a glide path that outlines a gradual reduction in the duration of its bond portfolio to mitigate the impact of interest rate fluctuations.

4. **Debt Repayment:**
– In the context of paying down debt, a glide path may outline a gradual reduction in debt levels over time. This could be applied to personal debt, corporate debt, or government debt management strategies.

The concept of a glide path emphasizes the importance of adjusting investment or financial strategies over time to align with changing circumstances, goals, or risk tolerances. It provides a systematic approach to managing financial assets and liabilities throughout different life stages or economic conditions. The specific adjustments in a glide path depend on the individual’s or institution’s financial objectives and the prevailing market conditions.