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Worry-free Investing: Creating A Safe Investment Channel for China's Young Future

Worry-free Investing: Creating A Safe Investment Channel for China's Young Future. Peng Huang Boston University. 1. Problematic pension system (1) The pension benefit is not inflation-protected ( example )

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Worry-free Investing: Creating A Safe Investment Channel for China's Young Future

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  1. Worry-free Investing: Creating A Safe Investment Channel for China's Young Future Peng Huang Boston University

  2. 1. Problematic pension system (1) The pension benefit is not inflation-protected (example) (2) Defined-Benefit Defined-Contribution, then who will take the risk? • 2. What choice do we have? Most basic choices: Bank deposit, stock… Is stock safe in the long run?

  3. 3. Inflation-linked bonds should serve as the benchmark asset for investment. US has TIPS and China needs CHIPS. My results show that the portfolio including CHIPS significantly improve the risk-reward tradeoff. Conclusion: Issue CHIPS and let them be the benchmark asset of investment, especially for pension investment. (End)

  4. Thank you !

  5. Suppose a typical pensioner at age 60 is expected to live for around 20 more years and receives the nominal annuity. Given the current average inflation rate, how much purchasing power you might lose over this period? • For the case of China(5.62%): • If you live for 20 more years, you lose 67% of its value over this period. • If you live for 30 more years: you lose 81% of its value over this period. • For the case of US(3.64%): • If you live for 20 more years: you lose 50% of its value over this period. • If you live for 30 more years: you lose 65% of its value over this period. Go back

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