← Glossary
Sequence-of-returns risk
Two paths with the identical average annual return can end at very different balances if the bad years land at different times: early losses on a small balance matter less than the same losses hitting a large balance later, and the reverse is true once you're withdrawing rather than contributing. This is part of why Monte Carlo's range of simulated paths is more informative than a single average-return projection — the average return doesn't capture the sequence.
This explains what sequence-of-returns risk measures. It isn't investment advice — see the disclaimer.