Sequence of Returns Risk: Why Average is a Lie
Max Kirouac - May 08, 2023
From 1981 to 2020, the S&P 500 returned 11.5% per year on average. That’s a pretty nice rate of return – if you had $10,000 invested at the beginning of this period, it would have been worth about $780,000 by the end of 2020 (excluding the impact of investment fees and taxes). That’s a great statistic, but it ignores a pesky phenomenon known as sequence of returns risk.