(Read in 4 minutes) Investing isn’t about chasing the latest winner. It’s about surviving the storms — those inevitable periods when markets turn against you, often for much longer than anyone expects. Survival in investing isn’t built on bold predictions but on one timeless principle: Diversification.
The Hidden Risk in Retirement
Market downturns are stressful for every investor, but for retirees, they pose a particularly perilous threat. The danger isn’t just poor returns — it’s the order in which those returns arrive.
This is called the sequence of return risk. If a retiree experiences significant losses in the early years of retirement while simultaneously drawing income, even a market that later recovers may not be enough to save them. Once the portfolio has been depleted, there is no way to “offset these losses.”
Let’s look at a real-world example. A retiree who started the year 2000 with $1,000,000 and withdrew $50,000 per year (with a 3% annual cost-of-living increase) would have run out of money after just 17 years if their portfolio had been invested entirely in the S&P 500. The early 2000s witnessed two brutal bear markets in less than a decade, and the timing was disastrous for retirees relying solely on a single asset class. Although the market eventually recovered, the damage was already done.
The Power of Diversification
Now consider a different approach. A globally diversified portfolio — such as those designed by VIA IV Investments — spread across U.S. and international stocks, large and small companies, real estate, bonds, and other asset classes — tells a very different story. Instead of collapsing under the weight of one market cycle, the portfolio survived and, in many cases, thrived.
Why? Because no single asset class dominates all the time. While U.S. large-cap stocks struggled through lost decades, other areas — such as international equities, real estate, or bonds — often filled the gap. This balance allowed retirees to continue taking withdrawals without exhausting their portfolios.
Diversification doesn’t guarantee smooth sailing. Every asset class has disappointing stretches. But combining them creates a stronger, more resilient whole. That resilience is what shields retirees from sequence risk, enabling them to continue funding their lifestyle even in stormy markets.
The Trap of Recency Bias
Of course, resisting the urge to chase past winners is hard. In the late 1990s, investors heavily invested in U.S. tech stocks just before the crash. More recently, many have concentrated in a handful of asset classes or even a few companies, believing their past success ensures future strength.
This kind of thinking leads to concentration risk — the very opposite of diversification. The reality is simple: the assets that saved you in the last downturn will not be the same ones that save you in the next. That’s why true diversification — across regions, sectors, and asset classes — isn’t just smart investing. It’s survival.
A Better Way Forward
Successful investing has never been about predicting the next hot trend. It’s about preparing for the fact that storms will come, and they will often last longer than expected.
For retirees, the key to survival is to diversify like crazy. Those who concentrated their wealth in a single index, like the S&P 500, discovered how quickly it could vanish — running out of money in just 17 years. Meanwhile, globally diversified portfolios survived, allowing investors to retire with confidence — without the fear of running out of money due to over-investing in a single asset class.
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VIA IV Investments
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