Sustainable Investment Withdrawals

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Abstract
The mean–variance approach permits the evaluation of portfolio strategies without otherwise first specifying preferences about risk. It is not well suited, however, to investors who must make periodic withdrawals from their investments. This includes endowment funds, foundations, and individuals after they retire. Expected utility models have been applied to such situations, but they have been difficult for practitioners to implement since preferences must be specified beforehand. By assuming such investors want to make sustainable withdrawals, the author develops a simple model for evaluating investment choices over time without making any further assumptions about preferences. Various factors that affect the size and sustainability of the withdrawals are explored.