Underestimate sequencing risk at your peril. For portfolios with similar annualised returns but with cash flows in or out, the sequence of returns – when the gains and losses occur – can make a massive difference to final portfolio values. You can have two $1 million portfolios with the same regular withdrawals and similar annualised returns for the investment period as a whole. But the sequence of those returns can mean the difference between a final value of $0 and doubling your money. So how can investors mitigate this major threat to long-term wealth?
Read the full article here ‘The sequence counts’