Managing Sequence of Risk Returns


Michael W. Crook, CAIA
Chief Investment Officer

Executive Summary

  • Sequence of Returns Risk: Defined as the vulnerability of investment portfolios to extended periods of poor performance coupled with distributions, leading to an inability to sustain planned withdrawals.
  • Alleviating Sequence Risk: Strategies include investment planning to quantify risks, diversification to mitigate drawdowns, and maintaining spending flexibility to adjust distributions during challenging periods.
  • Importance of Planning: A financial planning process helps investors understand goals, quantify risks, and preplan responses to mitigate the impact of sequence risk, akin to a fire drill in emergency preparedness.
  • Diversification and Spending Flexibility: Emphasizes the importance of diversification, especially over multigenerational horizons, and advocates for maintaining the ability to adjust spending temporarily to mitigate the two-in-a-row problem associated with sequence risk.

In his latest white paper, Chief Investment Officer Michael Crook explores the sequence of returns risk, which is a “two in a row” problem in investing. It refers to the vulnerability of investment portfolios to extended periods of poor performance. In simple terms, a sequence of returns risk happens when sustained poor investment returns, coupled with distributions from the portfolio, result in a situation where the portfolio can no longer support planned distributions. Download the white paper below to read more.

Read the white paper here.

Disclosures & Important Information

Any views expressed above represent the opinions of Mill Creek Capital Advisers ("MCCA") and are not intended as a forecast or guarantee of future results. This information is for educational purposes only. It is not intended to provide, and should not be relied upon for, particular investment advice. This publication has been prepared by MCCA. The publication is provided for information purposes only. The information contained in this publication has been obtained from sources that

MCCA believes to be reliable, but MCCA does not represent or warrant that it is accurate or complete. The views in this publication are those of MCCA and are subject to change, and MCCA has no obligation to update its opinions or the information in this publication. While MCCA has obtained information believed to be reliable, MCCA, nor any of their respective officers, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.

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