The ABC of sequencing risk

Challenger Retirement Income Research | 24 October 2012

There are those who believe that volatility is not a risk provided that an investor stays 'for the long term'. This is simply not true in the case of any portfolio that has cash flows. The culprit is sequencing risk - the risk of experiencing investment returns in an adverse order. It is a subset of market risk or volatility. The crux of sequencing risk is that cash flows amplify market risk and they do it in a way that is obscured by the use of...