Client Deliverables
Two forces,
one gap.
When a long-horizon strategy pulls ahead of a conventional stock-and-bond blend over decades, it is tempting to credit a single clever idea. The arithmetic says otherwise. Under any assumption set, the divergence traces to just two forces — and once you name them, the result stops looking like magic and starts looking like mechanics.
The question we actually answer
This examination does not forecast a number. It identifies what drives the gap between a custom equity-oriented approach and a conventional 70/30 or 80/20 index blend over a long horizon, then shows how sensitive that gap is to the assumptions. The point is to make the comparison legible: not "you will end with X," but "here is exactly why one path pulls away from the other, and here is how much of the gap survives if the optimistic assumptions don't hold."
The assumed CAGR spread
A higher assumed compound growth rate on the equity core, versus a blend whose return is anchored down by a bond sleeve compounding at a low long-run rate. Two to four points a year, compounded over two decades, is most of the gap.
Principal never sold
If income covers the spending need, no holdings are sold to fund life. The blends that fall short on income must sell principal each year — shrinking the base that compounds. The drag is small annually and large cumulatively.
Under the assumed CAGR range, a custom equity-oriented path ends a 20-year horizon roughly 1.7× to 2.4× a conventional bond-blended baseline — almost entirely explained by the assumed growth spread plus the avoidance of principal sales. Change the assumptions and the multiple moves; the two forces remain the whole story.
| Path | Assumed CAGR | 20-yr terminal* | × vs. 70/30 |
|---|---|---|---|
| 70/30 index blend | ~8.05% | ~$4.71M | 1.00× |
| 80/20 index blend | ~8.77% | ~$5.38M | 1.14× |
| Custom — low case | ~11.0% | ~$8.06M | ~1.71× |
| Custom — high case | ~13.0% | ~$11.52M | ~2.45× |
*Deterministic illustration on a $1,000,000 base at the stated annual rates, no withdrawals. These are hypothetical assumptions, not forecasts; real returns vary year to year and the custom path's growth assumption is the single most influential and least certain input. Not a recommendation of any strategy.
"Name the two forces and the gap stops being a mystery."
How the examination is built
- Decompose the gap. We attribute the divergence to its two real sources — the CAGR spread and principal preservation — rather than to a narrative.
- Use honest baseline inputs. The index blends compound at the bond sleeve's realized long-run return, not an inflated current yield.
- Flag the soft assumption. The custom path's growth rate is labeled as the most influential and least certain input, and is bracketed by a low and high case.
- Hold withdrawals constant. The comparison assumes the core is untouched, isolating structure from spending behavior.
- Report a range, not a point. The output is a sensitivity band with the drivers named — not a single promised figure.
What this examination is — and is not
This is a structural decomposition of a long-horizon benchmark under stated hypothetical assumptions. It is explicitly not a forecast, a performance claim, or a recommendation of any strategy or allocation. It exists to make the comparison honest: to show what drives the gap and how much of it depends on assumptions that may not hold. The household draws its own conclusions.
Want this checked against your actual account?
This examination shows one way money can quietly leave a portfolio. If you want us to examine what may be happening in your actual accounts, request a confidential fee review.
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The Direct-Index Examination — Owning an index as one pooled fund versus the individual stocks inside it, and why the difference shows up at tax time.