Sequence of Returns

Sequence of Returns Risk – What does it mean during Retirement

As per a CRISIL report the average return on a diversified equity investment has been around 18% since 1997. However, all of us know that averages are very misleading and are impacted significantly by outliers. And we all have heard of the story of a 6ft tall person drowning in a river of average depth of 5ft – as in some places the depth of the river could be 2ft and at other places significantly more than 6ft and still the average could be 5ft. Similarly, in markets (in general) the returns are volatile – sometimes the returns are significantly higher than the average and at many others lower (even negative) than the average. This is what drives our Portfolio Value and its volatility.

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