🏦 Sequence-of-returns risk

🧭 Background & Context Sequence-of-returns risk describes the danger that the timing of returns affects a portfolio’s outcome more than the average return itself. It primarily affects investors who regularly withdraw money—typically in retirement or with a withdrawal plan. Two people with identical average returns can achieve completely different results if their bad years occur at different times. For private investors, this risk is particularly relevant because it calls into question the predictability of payouts and carries the danger that a portfolio will be depleted prematurely during the withdrawal phase. 🔍 How It Works in Detail During the accumulation phase, fluctuations have a neutral to positive effect: a price decline means that new contributions are bought more cheap …