The Probability Effect and the Sequence of Returns Risk

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Frank: I'm about to reach my financial independence number and I'm spending lots of time using the portfolio visualizers Monte Carlo simulator. Every time I think I'm there, I activate the option to simulate the sequence of returns risk. That one where you can pick the first x years of retirement that would be the worst in terms of market return. And the results are so worrisome that I just keep working a year more. Will I need to work for 10 more years to compensate for the worst 10 years that could happen? Is that the only safe answer? Keep in mind I'm a very, very risk averse investor who has a 50% stock, 30% treasuries, 20

In this episode we answer questions from Shplendid Spencer, Russel and MyContactInfo. We discuss the pros and cons of online calculators and how they are commonly inadequate and/or misused, why being conservative beyond realistic possibilities is probably not a good idea overall, and an article by Aswath Damodaran about Nvidia, the chip industry and the implications of AI for DIY investing. CORRECTION: I said the Heat Map calculator was at Portfolio Visualizer -- it's actually at Portfolio Charts at the link below.

And THEN we our go through our weekly portfolio reviews of the seven sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional links:

Spencer's Tool Link: Rich, Broke or Dead? Post-Retirement FIRE Calculator: Visualizing Early Retirement Success and Longevity Risk - Engaging Data (engaging-data.com)

Similar Portfolio Visualizer Analysis Tool: Asset Liability Modeling (portfoliovisualizer.com)

Tyler on Security Analysis Podcast: Tyler (@PortfolioCharts): The Amazing Power of Uncorrelated Assets (securityanalysis.org)

Portfolio Charts Heat Map Tool: HEAT MAP – Portfolio Charts

Article on The Top Five Regrets of the Dying: The Top Five Regrets of the Dying - Wikipedia

List of Cognitive Biases: The Prospecting Lens - Prospecting Mimetic Fractals

Aswath Damodaran Article: Musings on Markets: AI's Winners, Losers and Wannabes: An NVIDIA Valuation, with the AI Boost! (aswathdamodaran.blogspot.com)