By
Randy Watsek
of
Raymond James
Friday, January 9, 2026 6:15 AM EST
Image Source: Unsplash
Over the past 25 years, the S&P 500 delivered an average annual return of about 8.4%, beating the Russell 1000 Value Index’s 8.0%. Yet consider this striking example: A retiree starting at the end of 1999 with $5 million, withdrawing $200,000 annually (adjusted for inflation), would have seen their portfolio shrink to roughly $2.1 million by the end of 2025 in the S&P 500—but grow to $9.9 million in the Russell 1000 Value.
Read that again. The index with the lower long-term average return ended up generating far more wealth.
How is that possible?
When you rely on your investments for spending—whether in retirement, funding education, covering emergencies, buying a home, bridging a job loss, or surviving a business downturn—preserving capital during downturns is just as critical as chasing higher average returns.
Picture this: if you lose money in a bad market and then must spend your depleted capital, there is no way for you to participate in the recovery.
This phenomenon, known as sequence-of-returns risk, is one reason why performance chasers often end up worse off than people who stay the course: assets that offer the highest return potential often carry the highest risk. And it is harder to recover from a bad outcome when you need the money at the worst time.
That said, life is not black and white. Putting all your money in a savings account won’t do you much good in accumulating wealth or beating inflation over time. Intelligent investing involves seeking attractive potential returns while avoiding excessive or unnecessary risk. It is as much of an art as it is a science, despite the endless array of models and formulas out there.
So why did the 1999 retiree end up increasing wealth with the lower returning index while depleting wealth with the higher returning index? The Russell 1000 Value lost less money during bad periods like the Dot.com bust and the Great Financial Crisis of 2007-09.
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Disclosures: Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request ...
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Disclosures: Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability. Please follow this link to additional disclosures: http://raymondjames.com/smrja.htm Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation. All investments are subject to risk, including loss. There is no assurance that any investment strategy will be successful. Any opinions are those of Randall Watsek and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Asset allocation and diversification do not ensure a profit or protect against a loss. Dividends are not guaranteed and must be authorized by the company’s board of directors. Keep in mind that individuals cannot invest directly in any index. The S&P 500® includes 500 leading companies and covers approximately 80% of available market capitalization. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange. The Russell 2000® includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The MSCI EAFE Index® is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. Advisory fees are in addition to the internal expenses charged by mutual funds and other investment company securities. To the extent that clients intend to hold these securities, the internal expenses should be included when evaluating the costs of a fee-based account. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs. A list of additional considerations, as well as the fee schedule, is available in the firm's Form ADV Part 2A as well as the client agreement. There are special risks associated with investing with bonds such as interest rate risk, market risk, call risk, prepayment risk, credit risk, reinvestment risk, and unique tax consequences. To learn more about these risks and the suitability of these bonds for you, please contact our office. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC
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