Investment Risk in Retirement Years

As Joe Farnsworth* from Toronto discovered, published return percentages do not necessarily tell the whole story of an investment portfolio performance. Joe retired 9 years ago from the Toronto Police Service from which he collects a serviceable pension each month.

When Joe retired he decided to try investing his life savings ($300,000) on his own in a mix of stock mutual funds so he could also see some growth in his savings. When the market swooned shortly after he invested his money, Joe stayed invested in order to ride it out and when the market recovered he benefited from that as well. However, his brokerage statements, which had an annual performance percentage on the first page, made it appear that he had not lost any money and yet he was still down about $75,000 or 25%.

What Joe and others like him often experience is the fallacy of statistics. Here is a three-year example that shows just how distorted numbers can get. If an investor invests $100,000 and after the first year loses $50,000, he is naturally down 50%. In the second year, if he gains just $16,600 back, he is up 30%. In the third year, he makes no return for 0%. In this scenario, the total return is -20% for an average annual return of -6.8%. But what is the dollar value of this same account? Of the original $100,000, the investor has just $66,600- a loss of 33% with an average annual return of -11%.

The trouble with performance numbers is that they sometimes mask a problem for retirees needing to draw income from their investments. Joe was fortunate as he also had a pension so he could wait out any market fluctuation until his investments recovered their value. Many retirees need to create income from their investments, but if performance statistics do not accurately portray reality (losses), it can spell disaster. When losses occur to a retirement portfolio, investors must cut back on the income they draw in order to give their investments a chance to recover. If they do not adjust, then their money never has a chance to regain value and they face the risk of running out of money during their retirement.

The best way to avoid major losses altogether is by using a professional to assist with your investment planning. Joe moved his investment portfolio over to a financial professional in Toronto and was very pleased with the changes they made to his asset allocation. Creating a diversified blend of investments can greatly reduce the ups and downs in a portfolio and preserve the needed income throughout retirement years.

*Fictitious characters for illustration purpose only.

Questions about Your Retirement Strategy?
Contact our office!

Copyright © 2017 AdvisorNet Communications Inc. All rights reserved. This article is provided for informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice. It is strongly recommended that the reader seek qualified professional advice before making any financial decisions based on anything discussed in this article. This article is not to be copied or republished in any format for any reason without the written permission of the AdvisorNet Communications. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission.

Our Dealership


Mutual Funds provided through Equity Associates Inc.

E-newsletter Sign-up

Click Here for Current Issue


Email marketing by AdvisorNet Communications Inc

My Insurance Broker

Home, Auto & Commercial Insurance provided through My Insurance Broker.


  • There are no words I can express how grateful I am having Chan working for me. I trust him explicitly as his knowledge and caring personality has proven itself again and again over the years. I never hesitate for a moment to refer my family and friends. None have been anything but pleased.

  • It has been a few years I know Chan Yin as my Financial Advisor. He is very professional and hard to deliver the best for your investments.

  • What can I say about Better Financial? How about they are better than just a financial Advisor in my experience.

    I've been a long standing client of Chan Yin and his team for over 15 years and it's not only what they have done for me financially, it's the personal approach that's kept me with such an incredible and caring company. They have met and exceeded all my goals and have always been there for me. I can't say enough about how professional and kind hearted the team at Better Financial are.

    I have recommended them to all my friends and family and no one has ever been disappointed. Thank you again for all you have done and do for me.

  • Our friends who had previously worked with Chan referred us for our first home purchase. We weren't experienced in this area and didn’t want to make a mistake. Chan was so helpful in guiding us through the process of getting our first mortgage. He also got us a better rate than what we found on our own. His warm and genuine personality inspired trust. This was important for us; we had a good experience and were pleased with the result.

  • We have been working with Chan for a number of years and have found him to provide clear and concise advice in a highly professional manner. He has spent time understanding us, where we are coming from and our goals; has provided clarity on our existing financial planning and has provided us with a clear strategy as to how we achieve the goals that we have.

  • We have been referring clients to Chan for a number of years now. He has always provided them with sound advice and they appreciate his friendly yet professional manner. Over the years he has earned my trust and I now have every confidence that any client I refer to him will receive the best possible service.

Mortgage Intelligence

Mortgages provided through Mortgage Intelligence.

Better Insurance Inc.

Life and Health Insurance provided through Better Insurance Inc.

Life Insurance Quick Quote