Glide path

A glide path is a schedule of target asset weights, written down in advance, in which the share of risky instruments is set as a function of the time remaining until the goal: the less time is left, the lower the share of equities and the higher the share of short-term bonds and cash instruments. It is not a one-off decision about portfolio structure but a sequence of such decisions, all taken at once and for the whole term ahead.

How the schedule is set

The glide path is built from the investment horizon: it is divided into segments, and for each segment a target portfolio weight is fixed for every asset class. Its shape is defined by three parameters, all of them stated in words rather than calculated: where the path starts, where it ends and how steeply it descends. The steepness determines over what period the risky portion is cut back; the end point is almost never zero, because a portfolio with no risky assets is fully exposed to inflation risk. Execution comes down to comparing actual weights with planned ones on the date of each step and bringing the former into line with the latter.

What happens to positions at each step

The reduction applies to an asset class, not to individual securities: within the equity portion, cuts are usually made pro rata so as not to alter the diversification at the same time. If the portfolio holds a position in a large stock, part of it is sold at each step and the proceeds move into short-term debt.

Where the term is misunderstood

A glide path is often confused with rebalancing. Rebalancing returns weights to a fixed benchmark; a glide path shifts the benchmark itself: each step changes the target structure rather than restoring the previous one. The second misreading treats the glide path as a promise of a result. The schedule governs only the portfolio's volatility; it does not raise the probability of reaching the target sum if contributions are insufficient for it. The third is the belief that moving money into bonds removes risk. It changes the composition of risk instead: market risk decreases, while sensitivity to interest rates, to inflation and the credit risk of issuers remain, and in the later part of the path they carry more weight than at the start.