Page 63 - Ready Set Retire
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Ready. Set. Retire!
Figure 8: Dow Jones Industrial Average vs. 5% Fixed Growth 1983-
2010
Again, this is a function of the principle outlined in the
previous section about rates of return. When you can eliminate
risk you get a much, much better result, even if your overall
rate of return is lower. And it’s a much better situation for
income. Since you never sustain a loss, you never have to sell
distressed shares, meaning your money has more chance of
lasting your lifetime.
Here’s another example, which shows the damage broad
market swings can do to your retirement nest egg. Assume you
have two funds. Fund A is volatile, but has the potential for
large returns. Fund B is much less volatile and has much lower
rates of return. Look at how this plays out in this chart.
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