Greetings!,

This week we will look at part 3 of our 12 week series:

Why Recovering From a 30% Market Loss Takes More Than You Think.

If your investment portfolio fell 30%, how much would it have to gain to get you back to where you started? Many investors would probably answer, "30%."

Unfortunately, that's not correct.

Suppose you have $100,000 invested. The market falls 30%.

You now have $70,000. To get from $70,000 back to $100,000, you need a gain of approximately 42.9%. That's an important lesson about investment losses.



Losses and gains aren't symmetrical

Consider these examples:

• A 10% loss requires an 11.1% gain to recover.

• A 20% loss requires a 25% gain.

• A 30% loss requires approximately a 42.9% gain.

• A 40% loss requires approximately a 66.7% gain.

• A 50% loss requires a 100% gain.

The larger the loss, the more difficult the recovery becomes.

Why does this matter to retirees? If you're still working and saving, you may have years or decades to recover from a significant decline.

If you're retired and withdrawing money from your portfolio, the situation can be different.

You're not simply waiting for your portfolio to recover. You're taking money out along the way.

That's why we believe downside risk deserves attention.

I'm not suggesting that investors should attempt to avoid every market decline. That's impossible.

I'm also not suggesting that tactical allocation eliminates losses.

It doesn't. What we are trying to accomplish at Benchmark Financial Design is based on the belief that investment management should support the overall financial plan.

Tactical allocation is one component of that approach.

We believe it can make sense to pay attention to market conditions and adjust exposure when appropriate.

Sometimes, that will mean giving up some upside. That is an important part of the trade-off.

The goal isn't to win every quarter.

The goal is to build a strategy that makes sense for the investor's circumstances.

A question worth considering: How much of a decline could your retirement plan absorb before you would have to change your lifestyle?

That's a very different question from: "How much return can I earn?" Both questions matter.

A Smart Moment takeaway.

Investment risk isn't simply about volatility on a statement. For a retiree, a significant decline can affect income, confidence, and the ability to accomplish long-term goals. Understanding that risk before it happens is one of the most important parts of retirement planning.

If you would like to re-examine your risk, or the risk of your portfolio, feel free to contact us so we may prepare a portfolio risk review for you.

As always, thanks for reading.

Bernie & Chad