Simulate a bad sequence: two falling years (−20 % and −10 %) at the start of the horizon (sequence-of-returns risk)
Portfolio trajectory
Portfolio A
Portfolio B
Portfolio A · final value
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Portfolio A · return in a bad year
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Portfolio B · final value
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Portfolio B · return in a bad year
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Deterministic model with assumptions: equities 7 % a year and bonds 3 % a year (long-run nominal averages); the «bad year» assumes a −37 % fall in equities and −5 % in bonds, the orders of magnitude seen in 2008 and 2022. It does not use live historical data and does not predict the future: it illustrates the relationship between expected return and the depth of the hole — the more equity, the higher the expected final value, but the worse the bad year. The risk that actually matters is not the one a chart measures, but the one that would make you abandon your plan.