 For those who are living off their capital, the ability to provide income and capital security from their portfolio, irrespective of stock market and economic risk is critical, as is the ability to increase income and capital needs in line with inflation.
You cannot realistically provide income and capital security without managing or at least knowing the disposition of all assets and needs and modeling their interaction. Within a properly constructed portfolio, stock market crashes, bear markets and recessions should have little or no effect on the ability of a portfolio to supply planned income and capital needs. Periods of significant investment risk occur every 10 to 15 years. After such events it can take between five and ten years for the return on equities to match the return on lower risk assets and, sometimes considerably longer - this is before transaction costs and management charges. A 60 year old is likely to experience two to three such events during his or her portfolio’s lifetime! How an organization structures its portfolios to meet an investor’s financial needs is critical. If your manager has to sell investments on an ongoing basis to meet your financial needs, your portfolio may well be exposed to significant risk and the risks to financial security this would pose. A well structured portfolio should be able to meet income and capital needs without forced sales for years. What this means is that the portfolio needs to be structured to meet needs years in advance which requires sophisticated modeling and management of assets and needs over time.  | 
