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      10-01-2021, 05:05 PM   #48
VertigoAtHome
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Drives: 2021 X5 x40i M Sport
Join Date: Feb 2021
Location: North Georgia

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Quote:
Originally Posted by chassis View Post
VertigoAtHome the chart in your post is SP500 price only, for avoidance of doubt.

During the inflationary period of 1975-1981, the S&P total return was 12+% annually and government bond yields were around 8%. Compared with inflation of 6%. Do you agree on that for the period in question?
Yes, looking at a CAGR calculator (MoneyChimp) for that period it's 8.6%, add in dividends and it jumps 14.1%, add in inflation and it's down to 4.2%. That isn't terrible, in fact given the inflation back then it's good, better than if you started investing in Jan 2000, by Dec 2007 you have a negative return adjusted for inflation. On your point, I agree equities is a good approach, and probably the best approach in today's market. That's where my money is!

However you can pick periods that change the outcome. What if you invested in 1968 (i.e. not near the bottom of the bear market) and were 65 yrs old. By 1981 when you are 78, you'd have a -1.51% return including dividends and inflation over that period. So for those like me who use the bucket approach to investing, having 5, 7, 10 yrs cash certainly helps, but won't necessarily get you to the other side bear market before you need to start selling. That said, I still think it's the best strategy, particularly in todays market. I've included an inflation adjusted S&P chart below for reference.
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Last edited by VertigoAtHome; 10-01-2021 at 05:55 PM.. Reason: Grammer!
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