Why is the order of your returns a risk? Why is the sequence in which you earn good and bad returns important? It isn't if you invest a lump sum at the start of your investment period and retain it throughout. But it is important when you are saving a monthly amount or drawing an income - in fact the sequence can be critical to the sustainability of savings you are using to provide an income. Bridge Fund Managers illustrates the problem using a simulated return sequence that you might get from a typical balanced fund over a 20-year period.
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