// definition
Sequence risk
Sequence-of-returns risk
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Short definition
The risk arising from the timing of investment returns when a portfolio funds withdrawals. Early losses can force the sale of more units, leaving less capital to participate in a recovery. Two sequences with the same compound return may therefore support different incomes. The effect depends on the withdrawal rule and other available resources.
risk atlas
Knowledge map
Intuition
The order of returns matters when withdrawals change how much remains invested.
Related analyses
- Retirement and the average-return trapFictional examples and an interactive withdrawal model.
Primary sources
- Society of Actuaries, 2023Section A.2: market and sequence-of-returns risks.