How to Avoid Sequence-Of-Returns Risk

How to Avoid Sequence-Of-Returns Risk

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INVESTORS TEND TO BE focused on short-term returns, even though people know intellectually that the long haul is important.

It’s hard to avoid peeking at your investment results every quarter or every month, even when your logical brain tells you that it’s the coming years, not the past month, that matter.

Everybody likes seeing their account value grow, but there is a trade-off. Risk levels must account for an investor’s need for income, life expectancy, financial goals and other considerations. An investor must take enough risk – in the form of stock ownership – to meet his or her lifetime goals, while also dampening volatility with lower-risk securities, typically short-term, high-quality bonds.

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