Do you like drama? Me neither. In a relationship, it’s exhausting. In an investment portfolio, it’s expensive.
As we look back at a generally favorable market in 2025, we want to highlight an important concept that often appears simple on the surface but can be surprisingly complicated: investment performance.
The Same Return… Different Results
Consider two investors: Steady Sarah and Dramatic Darin.
Ten years ago, both started with $1 million. Neither added to nor withdrew from their accounts. Over the decade, both experienced an average annual return of 7%.
You might expect their ending balances to be the same — but they weren’t.
- Sarah (Diversified & Steady): $1,948,000
- Darin (Aggressive & Volatile): $1,815,000
Despite having the same average return, Sarah finished with $133,000 more.
How is that possible?
Why Losses Matter More Than Gains
The answer lies in how markets move — and how losses affect compounding.
If a $1 million portfolio declines by 20%, it falls to $800,000.
To recover back to $1 million, that portfolio doesn’t need a 20% gain — it needs 25%.
The deeper the decline, the harder the recovery.
By keeping Sarah’s portfolio fluctuations more modest, her money spent more time growing and less time climbing back from losses. Over long periods, that difference compounds quietly — but meaningfully.
Why This Matters Even More in Retirement
Volatility becomes especially important once withdrawals begin.
When you’re contributing to a portfolio, market declines can feel like temporary setbacks. But during retirement, when income is being withdrawn regularly, market downturns can have a lasting impact.
Selling assets during market declines means:
- Fewer shares remain invested
- Less participation in future recoveries
This dynamic can significantly reduce the longevity of a portfolio.
That’s why managing volatility isn’t just about comfort — it’s about protecting long-term income.
At Bourke Wealth Management, we spend considerable time designing, testing, and monitoring portfolios with the goal of reducing unnecessary volatility — not to eliminate growth, but to make it more reliable.
Another Quiet Drain: Taxes
Volatility isn’t the only factor that quietly affects outcomes. Taxes matter, too.
Now consider Tax-Savvy Tina and Do-It-Yourself Dan.
Like Sarah and Darin, both started with $1 million, invested similarly, and earned comparable market returns. The difference? Tina worked with an advisor who helped implement tax-efficient strategies, while Dan managed everything himself.
Over time, Tina benefited from:
- Tax-efficient asset placement
- Strategic tax-loss harvesting
- Avoidance of common pitfalls such as wash-sale violations
Dan’s approach wasn’t reckless — but a handful of small, understandable mistakes resulted in higher taxes over time. Those dollars, once paid, were no longer compounding for his future.
In many cases, thoughtful tax planning can offset advisory fees entirely — and sometimes more. While the work happens behind the scenes, the impact shows up where it matters most: your after-tax returns.
The Bottom Line
Our goal is straightforward:
- Lower volatility
- Lower taxes
It may not be flashy, and it won’t generate cocktail-party stories, but it helps keep more of your money working for you, longer.
Thank you for trusting us with your financial future. We value that trust and take it seriously.
P.S. You may notice that the women came out ahead in both examples. That was intentional, and we’ll explore why in a future post.
This commentary reflects the personal opinions, viewpoints and analyses of the Bourke Wealth Management employees providing such comments, and should not be regarded as a description of advisory services provided by Bourke Wealth Management or performance returns of any Bourke Wealth Management client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Bourke Wealth Management manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
