One of the most vital services a financial advisor provides to a client is to provide the right mix of investment strategies. We know that each client is unique and has unique needs and personal risk preferences. However, clients can generally be grouped into two major categories – they are either in the accumulation stage of their investment portfolios, or in the distribution phase.

When saving for retirement, time gives a client a safety net to help protect against short-term risk. Once retired, however, a client cannot count on time, so it becomes much more critical to get the risk allocation correct.

See the chart below.  It shows the year-by-year account values for a portfolio allocated to 70% stocks and 30% bonds beginning in the year 2000. The dark line shows that an investor who was an accumulator was able (historically) to recover from two of the worst bear markets over the past 75 years (that would be 2000 to 2002 and 2008 to 2009) and finish the fourteenth year with 153% of their original starting investment.

With the safety net of time on the client’s side, holding thru the drawdowns was an effective risk-management strategy for the wealth accumulator. On the other hand, the bars show that (over the same time period) if the same investor employed the same portfolio to provide a yearly income (starting with a 5% distribution and increasing the distribution by 3% a year to cover inflation) the account value never recovers from the early market drops, and finally finishes the 14th year with only 26% of the original investment in place. At this rate the account could be completely depleted in only five more years.

Accumulators only need to be concerned with the time it takes to recover their drops.  Retirees must be concerned, however, about losses leading to accelerated erosion of principal and cash-flow risk. The lack of a safety net exaggerates the importance of even small adjustments to risk.

This difference between the accumulation and distribution phases is critical to determining the appropriate strategy and types of investments that work best for different clients in the different phases of their financial lives. The bottom line is that investors in the distribution phase no longer have time on their side and management of their portfolio risk is the top consideration during this phase of their lives.

In my chair, one of the more difficult tasks I face is helping clients to accept the fact that at retirement time it is paramount to re-think their risk preference strategy, and in many cases reduce the risk of their holdings. This will generally increase the expected length of time that the portfolio will last during retirement.

Thank you to James Sandidge for the main ideas for this article from his ‘Adaptive Distribution Theory’ as published in the Journal of Investment Consulting 17, no.2.

Market Minute 1/27/2017 – One More Time – Dow 20,000

 It has been an interesting past 12 months. 2016 provided us with the worst market (S&P 500 Index) start to a year…ever! Then there were the violent reversals in March, then Brexit and finally the U.S. elections all sending stocks into some of the largest tailspins in years. Almost everyone lost their nerve somewhere along the way there. Now with the passing of the DOW 20,000 mark many are discussing what ‘could have been’.  

Conventional wisdom had a poor year. The ‘bear’ camp sounded so logical. Yet now with Thursday’s Index* closing at 20,100 and many corporate earnings announcements being positive along with President Trump’s pro-growth policies, the rally that started the day after the election has once again been reignited.  

The latest thousand-point jump in the Dow was the second-fastest ever as almost $2 trillion has been added to U.S. equities in less than 90 days. The glorious burst at the beginning of November has slowed, and it’s time to remind all of you that most likely markets will slow a bit to consolidate the gains before the next large move. So relax and enjoy your past couple of months and realize that market returns do NOT move in straight lines.  

Moving –

Our corporate office has stayed within about a mile of our original location since the early 1980’s, and we have been fortunate in that moves have been rare.  But, it’s that time once again.  Our office building has been sold and leases are not being renewed as the new owner will apparently use this building for executive offices.

So please make a note of our new address after Feb. 1, 2017:

Denk Strategic Wealth Partners

10000 North 31st Avenue,  Suite C-262

Phoenix, AZ  85051

All other contact information remains the same. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
2702 N. 3rd St. Ste. 4001
Phoenix, AZ 85004

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.