Please ensure you fully understand the risks and take care to manage your exposure. Past performance is no guarantee of future results. The value of shares, ETFs and ETCs bought through an IG share trading account can fall as well as rise, which could mean getting back less than you originally put in. Please consider the Margin Trading Product Disclosure Statement (PDS), Risk Disclosure Notice and Target Market Determination before entering into any CFD transaction with us.

You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. You do not own or have any interest in the underlying asset. But if your portfolio only grows by 3% and inflation is 3%, any amount you withdraw would make an impact.ĬFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Your remaining money would continue to grow in value and earn dividends. For instance, if the rate of inflation was 3%, and your portfolio grew by 5%, you could withdraw 2% of your wealth without making a dent in it. Working out your ideal drawdown rate depends on two factors:Ī safe drawdown rate is usually the amount of growth above inflation your portfolio had in the previous year. And if it’s low enough, you’ll have enough in your portfolio to continue growing your funds over time. For example, if your portfolio is worth $400,000, and you need $40,000 per year to cover your costs, your drawdown rate is 10%.Ī high drawdown rate will result in you running out of money. Your drawdown rate is usually expressed as a percentage of your portfolio’s total value. In this case, we’ll use it to mean selling parts of your portfolio over time to cover your living expenses. ‘Drawdown’ is a term typically used in pension funds to describe the rate at which you withdraw funds from your retirement savings. That’s why it’s advisable to sell your investments gradually. However, this has implications for your future earnings and tax liability. If your investment portfolio is your nest egg, you’ll have to sell your assets for cash to fund your lifestyle. Living off your investmentįor some, investing in the markets offers an alternative or addition to traditional retirement funds. So you can always refer back to your history for any information you need. Luckily, most online brokers keep a log of all your interactions with your portfolio in your profile. In addition to your investment strategy, preferably one for each account, you should have a complete record of all your actions. Suddenly working out how profitable an investment is becomes complex. Perhaps you reinvested-or even withdrew-some dividends. For example, maybe you sold some of your holdings in an underperforming stock. Over this period, you could’ve also taken several actions you won’t easily remember. This makes it impossible to remember how much each of them cost at the time you bought them.

Some investments can be decades old, and your portfolio could contain several assets at a time.

Paint drawdown