The Impact Of Sequence Of Return Risk And How To Minimize It


Key Takeaways

Discussion of sequence of return risk
US survivorship bias
  • Long-term average returns above cash:
    • US: 5.5%
    • Foreign: 3.5%
    • Blended: 4.2%
      Standard dev is about 2%
  • The averages hide relative performance and variance that can occur from decade to decade. Proper diversification reduces the timing risk that can occur if your portfolio is overly concentrated or loaded to a small number of risk factors as you approach retirement or a period of withdrawals.