Seeking Alpha

Retirement Advisor: A Teachable Moment (Podcast)

by: SA For FAs
SA For FAs
Senior Editor, FA Content
Summary

There’s no time like a downturn to revisit “sequence of returns” risk, which holds that investment performance is dependent on returns the market generates at the point of retirement.

Many investors are uncomfortable addressing a phenomenon that requires them to hold lower-returning assets like bonds or cash as a hedge against a bad returns sequence.

Another reason for this tutorial: Some investors place excessive confidence in Monte Carlo simulations saying they have a high probability of portfolio success, without understanding this is a static view.

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There’s no time like a downturn to revisit “sequence of returns” risk, which holds that investment performance is dependent on returns the market generates at the point of retirement.

This podcast (6:56) suggests there are unpredictable occasions like the present market crisis, where anything less than a 100 percent assurance that retirees’ expenses are covered, would be calamitous.