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Timing Risk AI

Sequence-of-Returns Risk Lab (Decumulation Stress-Tester)

Verified Indian financial mathematics, statutory regulations, and step-by-step actionable breakdowns.

Tags:#Sequence of Returns#Retirement SWP#Decumulation Risk#Trinity Study#Portfolio Survival
Decumulation Risk LabLearning Lab • Wave 1

Sequence-of-Returns Risk Lab

Discover why identical average annual returns produce wildly different outcomes when cash withdrawals or contributions take place.

Load Example:
Order A Ending BalanceSurplus
₹44.51 L
Portfolio survived
Order B (Reversed) Ending BalanceSurplus
₹1.60 Cr
Portfolio survived
Terminal Wealth DifferenceSequence Effect
₹1.16 Cr
Caused purely by return timing!
Average Annual ReturnConstant Average
6.4% p.a.
Identical in both Order A & Order B

Sequence Setup

Initial Portfolio Corpus₹1,50,00,000
Annual Withdrawal Amount (SWP)₹7,50,000/yr
Safe Withdrawal Rate (SWR):5.0% p.a.
10-Year Return Cards (Order A)Average: 6.4%
Y1
-25%
Y2
-15%
Y3
-10%
Y4
+5%
Y5
+12%
Y6
+18%
Y7
+22%
Y8
+15%
Y9
+18%
Y10
+24%

Yearly Trajectory: Order A vs Reversed Order B

YearOrder A ReturnOrder A BalanceOrder B ReturnOrder B Balance
Year 1-25%₹1.07 Cr+24%₹1.77 Cr
Year 2-15%₹84.09 L+18%₹1.99 Cr
Year 3-10%₹68.09 L+15%₹2.19 Cr
Year 4+5%₹62.12 L+22%₹2.57 Cr
Year 5+12%₹58.97 L+18%₹2.92 Cr
Year 6+18%₹57.74 L+12%₹3.15 Cr
Year 7+22%₹57.46 L+5%₹3.20 Cr
Year 8+15%₹53.11 L-10%₹2.78 Cr
Year 9+18%₹48.57 L-15%₹2.26 Cr
Year 10+24%₹44.51 L-25%₹1.60 Cr

What Changed? Key Educational Takeaway

Even though average annual return was identical (6.4%), early crashes forced selling assets at distress prices, leaving Order A with significantly lower wealth than Order B.

Educational Decision Lab Notice: This simulator is developed strictly for educational literacy and hypothetical scenario comparison. myfinedu.com is not registered as a SEBI Research Analyst, Investment Adviser, or Portfolio Manager. None of these projections constitute personalized financial advice, investment recommendations, or endorsement of specific financial instruments. Past performance and illustrative model rates do not guarantee future market returns.

Mathematical Formula & Calculation Engine

Models Order A vs Order B (exact reversed sequence of returns) with ongoing cash flows. Reveals how early negative returns accelerate portfolio depletion in retirement.

Balance(t) = [Balance(t-1) - Withdrawal(t)] × [1 + Return(t)]

Why Use the Sequence of Returns?

Reveals why identical average annual returns do not guarantee equal retirement outcomes
Tests early bear market crashes on 20-30 year SWP retirement portfolios
Interactive return cards can be reversed and shuffled in real time
Identifies exact depletion year under adverse market sequences

Sequence of Returns FAQs

Sequence-of-returns risk is the danger that the timing of market returns will be unfavorable in your early retirement years. Selling portfolio assets during an early downturn locks in capital losses permanently.

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