A Risk to Retirement
Investors may know that, statistically, recent periods should not provide the starting point for future assumptions, but they can’t help themselves. The recent market environment has been too intoxicating for many to remain disciplined. As a result, investors may be questioning the foundation of a diversified portfolio which includes alternatives.
The problem is, with only a limited amount of time to save for retirement, not every investor can wait for the “average” return of equities to make them whole after a market downturn. And many fail to realize that it’s not only about the loss of monetary resources, but also the loss of time in which to make them back.
A $500,000 Portfolio’s Recovery from a 20% Decline
Those nearing retirement may not have time to rebound from significant losses.
The annual returns of 3%, 7% and 11% are hypothetical and used to demonstrate how long it may take to recover losses over time. The returns do not represent or predict the performance of any fund.
Think it can’t happen? Think again. Millions of people were headed for retirement with heavy equity concentrations in 2008 when the Dow began its precipitous fall, losing about 54 percent when all was said and done.1 With market indices again hitting all-time highs, pre-retirees are tempted to play roulette with their retirement assets.
1“Dow Jones Industrial Average,” WSJ.com