Standard deviation is the statistical measure used in the financial community to measure an investment’s risk, or volatility.  This measure shows how much an investment has fluctuated, both up and down, over a given time period.  No one complains about upward volatility with their investments; in fact, the more the better!  But downward volatility is a killer, especially for a retiree.

From 1982 through 1999, we experienced a bull market that produced great long-term returns from stocks with relatively low volatility.  In the last decade, volatility has returned and investment returns from the major stock indexes have been close to “0”.  New retirees have discovered how difficult it is to plan their finances when they don’t know what to expect from investment returns.

We believe that an investment portfolio can be built to perform well in all economic environments.  The objective of this type of Absolute Return investing is not to track a particular benchmark, but instead to emphasize risk reduction and a tighter range of potential returns.  By reducing risk, we lessen the likelihood that a retiree has to draw money from a steeply declining portfolio value.  By having a tighter range of outcomes, it becomes easier to plan your retirement and to be confident in your spending decisions.  See our special report, The Tremble Factor™, for more insight on how to build an investment portfolio for a long retirement.

Next week we’ll be exploring the investment side of retirement planning in more detail.  To make sure you get all of our reports, sign up for eNews from Modus Advisors by dropping us a quick note through our Contact Us link.