People at or near retirement age face a classic investing dilemma. You need strong investment returns to ensure you don’t run out of money in retirement. But you also can’t afford to suffer large losses in a stock market collapse.
The investment industry has long told us that you can’t have both—growth and safety.
We’re told that high returns come from aggressive growth funds, often concentrated in the technology sector. Many of these funds can generate annual gains close to 15%. The catch, however, is that they’re extremely volatile—capable of losing 30% or more in down markets. That’s true. Aggressive growth investments come with the risk of significant short-term losses.
For retirees, that kind of volatility can devastate a retirement plan.
We’re also taught that bonds are “safe” investments. But bond returns are much lower than stock returns, and bonds can lose money too. On average, bonds lose less in bear markets but earn far less in growth markets—typically 3% to 4% per year compared to about 10% for stocks.
It can seem like a no-win situation. Growth helps your retirement income, but it comes with high risk. Bonds feel safer but limit your income potential.
Investment professionals generally create a balance of stocks and bonds based on your age and risk tolerance. For older investors, they tend to favor conservative allocations, reasoning that the risk of a major loss early in retirement outweighs the benefit of higher returns.
The result? Many retirees end up with portfolios that produce mediocre returns (5%–6% per year) yet can still lose 25%–30% in a market meltdown. That’s the worst of both worlds.
Is that really all the trillion-dollar investment industry has to offer? Keep in mind, they charge high fees for these “solutions.”
I wasn’t willing to accept that reality. I never planned to get into the investment business—I was forced to. Necessity truly was the mother of invention in my case.
The stock market produces excellent long-term returns about 85% of the time—typically 15% to 20% per year. But the other 15% of the time, it loses money at a rate of roughly 37% per year.
I believed that if I could find a way to capture most of the upside during growth periods and avoid most of the losses during downturns, I could achieve higher returns with protection and safety.
I discovered that many others had tried to solve this problem, and some achieved decent results. But I found major flaws in their methods. Most relied on traditional stock market statistics—such as 200-day moving averages or indicators like MACD and RSI—that react too slowly in downturns and recoveries. While these approaches often perform better than the standard stock/bond mix, they’re still far from ideal.
So I set out to develop my own statistics and computer models. Fortunately, powerful analytical tools are readily available today.
Using hundreds of thousands of data points, and after about six months of work in 2019, I created my core investing system. It outperformed anything I’d seen for ordinary investors. Based on extensive backtesting, my system could outperform the S&P 500’s annual returns by 30% and reduce losses in market downturns by 60%.
I also knew that any successful system must remove emotion and guesswork. A disciplined, data-driven approach is essential. Predicting short-term market moves has always been impossible. Relying on emotion or intuition is not a recipe for success.
I came across a great investing quote recently: “Invest based on what you see, not what you think.”
I love how this quote succinctly sums up what works and what doesn't work in investing.
We’ve all seen the same talking heads continually—and incorrectly—predicting the next crash.
My objective then and now is simple: generate significant growth in retirement accounts while helping people sleep well at night. Having an automated, data-driven system that takes judgment and emotion out of the process is what investors truly need.
Knowing that you’re always properly invested—and that an automated system is protecting your life savings—leads to a terrific retirement. You get the financial freedom you deserve, without the stress of watching the market every day.
Since I’m a perfectionist, I never stop improving my investment system. Over the past six years, I’ve made significant upgrades each year—boosting returns and further reducing losses. Some of the biggest advances have come in just the last six months.
Despite what the investment industry tells you, you can have Growth AND Safety. Don’t settle for weak, conventional solutions. You deserve a better retirement.
After years of helping people through my investment newsletter, I’m excited to announce that very soon, everyone will be able to access my powerful investing system directly—with one click—from their existing brokerage account.
If you’d like to learn more about my investing system and how you can access it, reply YES to this email, and we’ll schedule a quick call.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
As many of you already know, I like to take luck out of the equation when it comes to retirement investing. By using data and probabilities, you can generate better and more consistent investment results.
However, there is one aspect of retirement investing where luck plays a significant role — the timing of your retirement. The actual month and year you retire can have a major impact on your financial security throughout retirement.
This effect is driven by what’s known as Sequence of Returns Risk. You can control your savings habits and investment strategy, but you have no control over the performance of the stock market in the early years of your retirement.
Your investment returns during the first seven years of retirement have an outsized impact on your overall financial outcomes. Let’s look at an example.
If you retire at age 65 with an account balance of $1.5 million and live to age 90, you should be able to comfortably withdraw about $113,500 per year during retirement, assuming you earn a consistent 7.3% annual return. I use 7.3% because that’s the actual average annual return for the S&P 500 over the past 25 years (excluding dividends).
The problem is that returns are not consistent each year — especially if your portfolio is invested in the stock market.
The table below shows the actual annual returns of the S&P 500 from 2000 through 2024. The straight average of those 25 years was 7.3%. In the last column, I reordered the returns so that the best-performing years came first (2010–2024) and the worst-performing years came last (2000–2009).
YEAR | Actual Returns | Flat Returns | YEAR (Reordered) | Returns (Reordered) |
2000 | -10.1% | 7.3% | 2010 | 12.8% |
2001 | -13.0% | 7.3% | 2011 | 0.0% |
2002 | -23.4% | 7.3% | 2012 | 13.4% |
2003 | 26.4% | 7.3% | 2013 | 29.6% |
2004 | 9.0% | 7.3% | 2014 | 11.4% |
2005 | 3.0% | 7.3% | 2015 | -0.7% |
2006 | 13.6% | 7.3% | 2016 | 9.5% |
2007 | 3.5% | 7.3% | 2017 | 19.4% |
2008 | -38.5% | 7.3% | 2018 | -6.2% |
2009 | 23.5% | 7.3% | 2019 | 28.9% |
2010 | 12.8% | 7.3% | 2020 | 16.3% |
2011 | 0.0% | 7.3% | 2021 | 26.9% |
2012 | 13.4% | 7.3% | 2022 | -19.4% |
2013 | 29.6% | 7.3% | 2023 | 24.2% |
2014 | 11.4% | 7.3% | 2024 | 23.3% |
2015 | -0.7% | 7.3% | 2000 | -10.1% |
2016 | 9.5% | 7.3% | 2001 | -13.0% |
2017 | 19.4% | 7.3% | 2002 | -23.4% |
2018 | -6.2% | 7.3% | 2003 | 26.4% |
2019 | 28.9% | 7.3% | 2004 | 9.0% |
2020 | 16.3% | 7.3% | 2005 | 3.0% |
2021 | 26.9% | 7.3% | 2006 | 13.6% |
2022 | -19.4% | 7.3% | 2007 | 3.5% |
2023 | 24.2% | 7.3% | 2008 | -38.5% |
2024 | 23.3% | 7.3% | 2009 | 23.5% |
Average | 7.3% | 7.3% | Average | 7.3% |
Using the same $1.5 million starting balance and the same 7.3% average annual return, we get very different outcomes depending on the order of returns.
If you use the actual returns from 2000–2024, your sustainable annual retirement income drops by about 40%, to roughly $66,000 per year.
That’s a huge difference — a monthly income of $9,500 versus $5,500. This would dramatically affect your lifestyle in retirement.
This example might seem extreme, but it’s very real. Retiring in January 2000 would have been one of the worst times to retire in the past 60–70 years.
Here’s why the timing of your retirement matters so much: In your first seven years of retirement, your account balance is at its highest. Since you’re withdrawing money every year, your balance steadily declines over time. A 10% gain in your early years may add more than $120,000 annually, while a 10% gain in your final years might only add $30,000 to $40,000.
Now, if you retired in January 2010, you were very lucky. The 15 years from 2010 through 2024 were exceptionally strong for the stock market — the S&P 500 averaged over 13% per year before dividends.
To illustrate, if we reverse the sequence — using 2010–2024 returns first and 2000–2009 returns last — the average annual return remains the same, but the order flips. In this scenario, the best years come first, and the worst come later.
That change alone raises the annual retirement income to $141,500.
The range of possible outcomes is wide. With the same starting balance and average return, simply rearranging the order of good and bad years can result in income ranging from $66,000 to $141,000 per year.
That’s the power — and danger — of luck in retirement timing.
You can’t control short-term market volatility, but you can minimize its impact. Using my investment system, which limits losses during down years, the effect of unlucky timing is greatly reduced — though it can never be eliminated entirely.
Because we can’t predict or control the sequence of returns we’ll experience, I recommend a conservative approach: Withdraw no more than 80% of your maximum projected income during your first seven years of retirement. This simple step helps preserve your capital and provides a crucial buffer against early market declines.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Most people track their investment results casually—or even emotionally—rather than empirically. They might have a rough idea of how their investments are doing from their account statements, but they rarely compare their results to objective benchmarks.If you have nothing to compare your performance against, how do you really know how you’re doing?
When I ask people about their investment performance, I often hear comments like these:
“We have a guy (or gal) who’s great. They have a knack for picking the right stocks. They got us into XYZ Company two years ago, and it’s done really well.”
“I just looked at my statements, and it showed that my investments had a 26% return over the last two years. I thought that was really good.”
“I’ve been using my advisor for ten years, and I’m very happy. They’re beating the estimates from the retirement plan we developed back then.”
“I do all my investing myself. I made a lot of money on lithium battery stocks (or marijuana companies, etc.) over the last couple of years.”
But when you ask these same people how their entire portfolio has performed compared to a benchmark like the S&P 500 over longer periods (3, 5, or 10 years), you often get blank stares or vague answers. Ironically, these are the same people who spend hours online comparing prices on vacuum cleaners to save $50—but when it comes to tracking something that could be costing them hundreds of thousands or even millions of dollars, they don’t know and often don’t want to know.
The Problem with Anecdotal Evidence
Those comments above are what we’d call anecdotal evidence. People love to share their good stock picks—but rarely mention the bad ones. And comparing actual performance to the conservative projections used by financial advisors isn’t valid either. Most advisors use assumptions of 6% or 7% annual growth in their planning models to ensure their clients don’t outlive their money. That’s prudent for planning—but not for measuring results.
The Importance of Long-Term Measurement
Many investors focus too heavily on recent performance because it’s easy to see on their latest statements. But recent performance tells only a small part of the story.The most meaningful measure of investment success is long-term performance. Investment results start to become reliable around the five-year mark, and ten-year results are even more telling. Why? Because the best way to evaluate a strategy is to see how it performs in both good markets and bad markets.Since a typical bull-and-bear market cycle lasts about 7.5 years, you need at least that much history to make a true performance judgment.
Example: My System vs. the S&P 500 (2002–2008)
Year | My System (% Gain) | S&P 500 (% Gain) |
2002 | 0.0% | -23.4% |
2003 | 34.9% | 26.4% |
2004 | 7.4% | 9.0% |
2005 | 2.1% | 3.0% |
2006 | 8.4% | 13.6% |
2007 | 15.9% | 3.5% |
2008 | -9.1% | -38.5% |
Total Return | 68.9% | -21.4% |
Annual Average | 8.5% | -0.9% |
Clearly, my system outperformed the S&P 500 over this seven-year period by about 9% per year. That level of outperformance is above average for my system, which typically beats the S&P 500 by about half that amount.
Focusing on Too Short a Timeframe
Now, let’s look only at the years between 2004 and 2006:
Year | My System (% Gain) | S&P 500 (% Gain) |
2004 | 7.4% | 9.0% |
2005 | 2.1% | 3.0% |
2006 | 8.4% | 13.6% |
Total Return | 18.8% | 27.4% |
Annual Average | 5.9% | 8.4% |
During those three years—average years for the S&P 500—my system underperformed by about 2.5% per year. If you had judged the strategy solely on that short window, you might have abandoned it—just before it dramatically outperformed in the following two years (2007–2008), gaining 56% compared to the S&P 500’s 43%.
The Danger of Short-Term Thinking
Many experienced investors actually make the mistake of evaluating performance over too short a time frame, simply because they watch the market more closely. They get caught up in daily or monthly moves—missing the forest for the trees.I’ve seen very smart investors switch strategies after just a couple of months of underperformance. But if you change investment strategies frequently, you don’t have an investment strategy at all. These folks become victims of a common mistake called Chasing Performance. These “experienced investors” end up making changes after a period of losses or underperformance—essentially “selling low and buying high.”
When It’s Right to Change Course
I’m not suggesting you stick with a bad strategy indefinitely. If your performance diverges dramatically from expectations, it may be time to make a change. For example, the S&P 500 was up 24% in 2023. If your growth strategy lost 10% that same year, it’s a clear sign something is wrong. In strong bull markets, all growth-oriented strategies should deliver solid gains.But no strategy will perform perfectly in all markets. My system prioritizes capital protection during bear markets. In the 2002 and 2008 downturns, my strategy lost just 4.6% per year on average—much less than the market (-31% per year)—and recovered much faster. In the up years, my system only modestly outperformed the market—by a few percentage points per year—and even underperformed during 2004–2006.
Winning the War, Not Every Battle
As a long-term investor, your goal is to win the war, not every battle.
If you’re 65 years old, your investment horizon is still likely 30 years or more. My system is designed to generate above-average returns over 10-, 20-, and 30-year periods while minimizing large losses in severe bear markets.
I wish I could beat the S&P 500 every month or every year—but that’s beyond my powers (and everyone else’s too).
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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