The biggest threat to income in retirement, yet one that is largely misunderstood, according to Cass Business School asset management Professor Andrew Clare, is sequence risk.
This concerns the sequence in which returns are generated, rather than the average return over time, explained Clare and is one of the biggest challenges to those looking to generate income in retirement. In the worst case scenario, he said, it could cause an investor to experience a large drawdown while they are still trying to draw income. "Losing 20% of your money - even temporarily - while you are drawing money from that pot, is potentially fatal," he added. Clare conducted research into reducing sequence risk, which has been used as the basis for the WM Capital Global Momentum Fu...
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