underscores the importance of Sequence Risk – the timing of large portfolio losses - in no uncertain terms.
Each of these hypothetical investors takes a 25 per cent loss on their portfolio, only at different times. Frodo doesn’t take the loss until 30 years after investing, Sam’s portfolio gets hit after 15 years, and Gandalf endures the 25 per cent drawdown immediately.. Gandalf, who took the loss early, has the value of his holdings go to zero before year 25. Sam, who took the loss 15 years into his investment career, winds up with less than $1.5-million at the end of three decades.
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