An income portfolio for the years you are drawing it down.
Retirement income is not a yield problem, it is a survival problem. What the portfolio has to do changes with rates, inflation, valuations and how many years are left. A portfolio chosen once cannot respond to the path it is on.
The order of returns, not the average.
While you are saving, only the average matters. Once you are withdrawing, the path does. A bad run early forces you to sell more units at lower prices, and the portfolio never fully recovers even if the average return is identical.
That is a volatility problem wearing a returns costume. The less the path varies, the less it matters when you happened to retire. Which is why the objective here is income measured against the volatility required to produce it, rather than yield on its own.
Income taken, capital intact.
The methodology has run as a published index since 2018. Below is what it paid out and what was left, with every dollar of income spent as it arrived rather than reinvested.
Income received $537,192
Principal balance $1,192,759
Arch ACE Core Absolute Income Index (VOIVWI), 2018-05-10 to 2026-08-24. Balance and income are derived from the index’s published total-return and price-return levels; income is the difference between them, taken as taken as paid rather than reinvested. “Principal balance” is the market value of that capital with the income removed, not the amount originally invested, which is why it can end above the starting figure. The starting value is notional and the series scales linearly with it. Index performance is hypothetical, does not reflect the deduction of advisory fees, transaction costs, or other expenses, and does not represent the results of actual trading. An index cannot be invested in directly. Past performance does not guarantee future results.
Income per unit of volatility.
The objective is a ratio, not a yield
Most income products set a target yield and let volatility land wherever it lands. Here the two are solved together: income and price appreciation measured against the volatility required to produce them. Two books paying the same are not equivalent, and the steadier one wins.
Holdings are weighted to decorrelate
Portfolio volatility is not the average of position volatilities, it is whatever the correlations leave behind. Equities, credit, duration and real assets are weighted so their paths offset rather than compound, which is where most of the volatility reduction comes from.
Income up, sequence risk down
Both moves point at the same outcome. The income is what funds retirement and the steadier path is what lets you take it, because fewer units are sold into weakness and the capital behind the income holds up better regardless of when you happened to retire.
Research, as it is published.
The methodology runs today as a published index rather than a fund. Rebalance notes, factor reports and research go out as they are published. Leave an address and we will use it for that and nothing else.
Figures shown are for Arch ACE Core Absolute Income Index (VOIVWI), 2018-05-10 to 2026-08-24: $537,192 of income on a notional $1,000,000, averaging 6.5% of the starting value each year, with an ending balance of $1,192,759. Arch Indices Corporation provides index and analytics services. Nothing on this page is an offer or solicitation to buy or sell any security, nor a recommendation of any investment strategy, nor tax advice. Arch is not a registered investment adviser and does not manage client assets. Index performance is hypothetical, does not reflect the deduction of advisory fees, transaction costs, or other expenses, and does not represent the results of actual trading. An index cannot be invested in directly. Past performance, whether actual or hypothetical, does not guarantee future results.
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