Sequence-of-returns risk

Sequence-of-returns risk — the fact that when returns arrive matters, not just their long-run average, once money is flowing into or out of a portfolio. A crash early in accumulation is a gift (decades of cheap buying); the same crash in the year you extract the Level 3 down payment is a wound. Unlike the behavioral fractures, it’s structural — and its defenses are structural too: the glide rule (money needed within ~2 years migrates to the guaranteed layer) and the ladder (near-term needs sit in maturing rungs, not equities). You can’t control the sequence; you control the exposure.

First used in: 2.8 · Behavior under fire