Sequence of Returns: Part II
The order of when things happen has implications for retirement savers, too.
In my last article, I explained why sequence-of-returns risk is one of the more underappreciated dangers of investing and showed how it can affect portfolio values during retirement. But how returns unfold over time also plays a role in planning for younger investors. In this article, I’ll explain why the sequence of returns is important and give some practical tips for dealing with it.
Sequence of returns is important because it can affect the dollar value of your portfolio if you’re making contributions or withdrawals over time. In a nutshell, the periods when more dollars are invested will carry more weight in your overall results.