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  • Frank Byrd, CFA

How can this be? A Quiz

Amen of the Week:

“If there is a silver lining to bad times, it is this: When facing severe challenges, your mind normally is at its sharpest. Humans seldom have created anything of lasting value unless they were tired or hurting.”

-Jon Huntsman, founder of Huntsman Corp. “Winners Never Cheat” (2011)

A Quiz: There are two investors, John and Jane, with several things in common. They both retired at age 65 with the same sized portfolio and withdrew the same amount of income out of their portfolios during retirement. They experienced the exact same compound annual growth rate and volatility over the 30 year period. John, however, ran out of money by age 85, while Jane’s portfolio grew ultimately to 2.4x its original size. How could this be?

Hint: the sequence of returns matters. Jane and John experienced the exact same returns, yet the order of these returns was reversed. John endured the negative returns early in his retirement, while Jane experienced those same returns late in her retirement. Same numbers, different order. Advisers often say that “volatility doesn’t matter to long-term investors”. Hogwash. Volatility can obliterate the portfolio of an investor who draws an income from their investments. This is especially important today given the high valuation levels of stocks and bonds. Looking at history, we can see that periods of high valuation levels have tended to be followed by periods of low or negative returns. This is why proper portfolio structure is CRITICAL for retired investors.

One of the most important things I do for my clients is to create a customized portfolio design based on their personal cash flow needs and risk temperament. The objective is to maximize the odds that the client’s portfolios will provide a lifetime inflation-adjusted income for the duration of their entire lives. Please reach out if I can provide more information on this subject to you or anyone you know.

[To request my spreadsheet with details of the above scenario, please email and type "How can this be?" in the subject line.]

Yours in the Field,

Frank Byrd, CFA


While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

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