Illustrative reader · Ramesh
A few years from retiring
Illustrative composite readers, used to open articles with a situation rather than a definition. They are NOT real people, NOT customers, and NOT case studies. Every persona page says so in its own text, because this site's credibility rests on never presenting an invented thing as a found one, and fictional people are the one invented thing we do publish.
Ramesh can see the date. His portfolio has done well and he has started to notice that a bad few years now would matter far more than a bad few years a decade ago. He is being offered products designed for exactly this moment.
Reducing risk without stopping growth, the risk that arrives when withdrawals begin, whether to retire in stages, and testing whether the plan survives a poor start.
18 articles written for this situation
How to Assess High-Yield Fixed-Income Offers
A fixed-income offer paying noticeably more than everything comparable is not a better deal. It is a different deal, and the extra yield is the price you are being paid for a risk. The only useful question is which risk, and whether the payment is enough.
Fixed income and cash · 5 min read
How Bond Duration Measures Interest-Rate Risk
Duration is the single number that tells you how much a bond or a bond fund will move when rates change. It is quoted in years, which makes almost everybody misread it as a maturity date.
Fixed income and cash · 5 min read
How to Build a Retirement Portfolio Before and After Retirement
Retirement day is not the moment a portfolio becomes safe. It is the middle of a transition that should start years earlier and continue for years afterwards, and the abrupt version is a mistake in both directions at once.
Retirement and drawdown · 5 min read
Should You Buy a Home Close to Retirement?
A purchase in your fifties is not the same decision as one in your thirties with a later date on it. Two things change at once — the loan outlives the salary, and the money spent is money that was funding the retirement — and they compound.
Borrowing and major purchases · 5 min read
How to Assess the Risk of a Corporate Fixed Deposit
A corporate fixed deposit shares a name with a bank deposit and very little else. It is an unsecured loan to a company, and the extra interest is precisely the payment for that difference.
Fixed income and cash · 6 min read
How Credit Risk Can Cause Losses in Fixed-Income Investments
Interest-rate losses reverse if you wait. Credit losses do not. That single asymmetry is the most important thing to understand about lending money to anyone other than the government.
Fixed income and cash · 6 min read
Drawdown and Recovery Time, and How to Read Them
A drawdown figure is the one risk statistic expressed in the units of the actual experience. It is also quoted in two incompatible ways, and the one usually printed is the flattering one — it starts the clock at a moment nobody can identify while it is happening.
Investing and market evidence · 4 min read
What Is a Goal-Date Glide Path and When Should Risk Fall?
A portfolio that was right for a goal fifteen years away is wrong for the same goal eighteen months away. A glide path is the decision to change it on a schedule rather than on a feeling.
Goals and asset allocation · 5 min read
How Bonds Work: Price, Yield, Maturity and Default Risk
A bond is a loan you can sell. Almost everything confusing about bonds follows from that one fact — including why the price falls when rates rise, and why a bond can lose you money without anyone defaulting.
Fixed income and cash · 6 min read
How Low-Volatility Investing Works
Hold the shares that have moved about least, on the argument that they deliver most of the market's return with less of the turbulence. It is the most intuitively appealing of the factor strategies and it carries a hazard the others do not — its name describes what it selects for, and readers hear a promise about something else entirely.
Investing and market evidence · 4 min read
What a Monte Carlo Simulation Does, and What It Assumes
Running a plan ten thousand times and reporting how often it worked is a genuine improvement on running it once. It is also the most confident-looking output in financial planning, and the confidence comes from the number of runs — which is the one thing about it that costs nothing and proves nothing.
Investing and market evidence · 4 min read
Risk Aversion, Risk Capacity and the Cost of Avoiding Risk
How much risk you can tolerate and how much you can afford to take are different things, measured differently, and they frequently disagree. Most bad portfolios come from answering one question when the situation required the other.
Behaviour and decisions · 6 min read
What Role Should Bonds Play in a Portfolio?
Bonds are usually justified as the part that returns less so the portfolio moves less. That understates them. Their real job is to be the money you can spend when equities are down — which is a different requirement, and it changes which bonds you should hold.
Fixed income and cash · 5 min read
Semi-Retirement or Full Retirement: What Changes Financially?
Continuing to earn something changes the arithmetic of retirement more than most people expect, because it works on three variables at once. Whether it is the right choice is a different question from whether it helps.
Retirement and drawdown · 4 min read
Why the Order of Returns Matters Once You Start Withdrawing
Take the same years of market returns and shuffle them. If nobody touches the money, every order ends at the identical value. Start withdrawing, and one order leaves you with nothing while another leaves you richer than you began.
Retirement and drawdown · 8 min read
Setting a Return Expectation You Can Actually Plan Against
Every plan needs a number, and the number most people use is the wrong one in three separate ways at once — it is an average rather than what compounds, it describes shares rather than the portfolio, and it is stated as a point when the honest answer has a width. Fixing all three usually lowers it substantially, which is the useful part.
Investing and market evidence · 4 min read
How to Stress-Test a Retirement Plan
Most stress tests change the return assumption until the answer becomes uncomfortable, then change it back. A useful one asks a different question: what breaks this plan, when would we notice, and what would we do about it.
Retirement and drawdown · 5 min read
Why Health Insurance Premiums Rise and How to Plan for Them
Premiums rise for three separate reasons that behave differently, and only one of them is about you. Knowing which is which tells you whether a rise is worth arguing about and what to do instead.
Insurance and protection · 4 min read