Why the order of portfolio returns is also essential to performance

Schroders Australia

The closer to retirement, the less likely a portfolio will recover from a significant correction. A 15% drawdown following a GFC type event would ultimately have a fraction of the effect on an investor that has 35 years to retirement, than it would on an investor with just 5 years from retirement. It is obviously essential to reduce the impact of these significant drawdowns, and we seek to achieve this through the use of a more dynamic asset allocation process than most portfolios offer. Further to this, we believe that the actual order in which you achieve returns is just as important. If you are able to do both these things, i.e. avoid significant drawdowns, and also smooth the order of returns, your longer run outcomes will be far superior. In this quick video, Schroders explores these important concepts. Access the video here: (VIEW LINK)


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