Beware of Dogma

In one of his many landmark articles, Paul Samuelson shows that investors should not change their exposure to risky assets depending on their time horizon. This seems to contradict the conventional wisdom that it is safer to invest in risky assets over long horizons than short horizons. The conventional wisdom follows from the observation that over long horizons above-average returns tend to offset below average returns. This apparent contradiction is the basis of the time diversification controversy. The purpose of this article is to set forth a clear and concise evaluation of the issues by separating mathematical truth from opinion.