Sequence-of-returns risk
The risk that major losses early in the withdrawal period permanently weaken a portfolio.
Definition
The risk that major losses early in the withdrawal period permanently weaken a portfolio.
Why this concept matters
It shows that the order of returns matters when a portfolio funds regular withdrawals.
What to watch
Two portfolios with the same average return may last very different lengths of time depending on the order of good and bad years.
Simple example
A major fall just after retirement begins may force more assets to be sold at low prices.
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