> I invest the $450k at 7% (I could get private loans at 10% or some syndication deals at higher than 7%, but let’s be conservative.)
Are there that many 7% investments that are safe enough to gamble your savings and the roof over your head on?
Are there that many 7% investments that are safe enough to gamble your savings and the roof over your head on?
if you have consistent costs every year to pay, you cannot rely on capital gains to fund it imho. Only coupon payments from bonds can do that - unless you're willing to take the risk that you might have to eat into your capital for down years.
A portfolio that includes some gold would have performed well enough during the 70s and 00s (gold wasn't a commodity in the same sense in the 30s).
2018: -6.24% 2016: 9.54% 2015: -0.73% 2011: 0.00% 2007: 3.53% 2005: 3.00% 2004: 8.99% 1994: -1.54% 1993: 7.06% 1992: 7.06% 1990: -6.56%
in all other years it was double digit in either direction (of course it more often increased than fell). So it's still a huge gamble, if you start this at the beginning of recession and/or need to eat into your capital it won't end great.
The best way to invest is to pick individual stocks in companies you have carefully evaluated.
Also I never said anything about taking out 7% a year.
Only if you're able to guarantee a priori that you're an outstandingly good stock picker. A substantial majority of retail stock pickers lose out significantly to broad-based index funds.
The alfphaantagelive calculator is reporting much lower numbers than the real value.
Yahoo has a symbol for S&P 500 total return: ^SP500TR Check out: https://finance.yahoo.com/quote/%5ESP500TR/chart?p=%5ESP500T...
Punch in December 2000 for start and today's date for end. You'll get 398% total return. 398/21 = 19% annual return.
Total return includes dividend re-investment.
The alphavatangelive calculator says 3.31%, but even without dividend reinvestment the S&P 500 reports 11% average annual gains.
This does not price in inflation which historically reported as 3% over long periods and was much lower until recently.
Damodran has as good historical financial returns summary page: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/... . According to the spreadsheet linked to on that page, S&P 500 returns with dividend reinvested is 11.64% since 1928. Assuming 4% inflation, that's 7.64% annual returns.
So going all in on the stock market over a long time you can withdraw 7%. Even through world wars, depressions and stagflation periods. Some decades will be better than others.
I don't think you understand how percentages work. 19% annual return means on average every year you get 19% of the amount you have at the beginning of the year, not 19% of the amount when you began investing in December 2000.
If the 21-year return is 398%, the correct annualized return is pow(1+3.98,1/21)-1 which is 7.9%.
Note the spreadsheet from Professor Damadoaran : http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls
The years 2001-2020 inclusive S&P 500 arithmetic average inflation adjusted total return is 6.79% ( =average(o92:o111) ). Which is below the 1928-2020 average return of 8.5%. Inflation might be underestimated. 6.7 is a lot closer to your calculation!