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When people refer to interest they often are referring to investment gains, rather than actual bank interest. Specifically, it is generally assumed that a dive
by michaeltoth 12y ago
When people refer to interest they often are referring to investment gains, rather than actual bank interest.
Specifically, it is generally assumed that a diversified investment portfolio will earn ~4% after inflation on average, and by spending 4% of your portfolio balance at any time you are reasonably safe in the assumption that your money will not run out. At 3% it's all but assured that your money will not run out. These are conservative assumptions and take into account the fact that in any given year your investment performance could be significantly less than 4%
- genwin 12y agoYes, a diversified investment portfolio could perform like that in the past, when the gov't wasn't minimizing interest rates. Nowadays only with much greater risk of loss of principal.
- aggronn 12y agoThe S&P 500 is up about 7% annually over the last 5 years, with inflation never exceeding 3% over that period. That leaves a calm 4% real return on one of the less risky investment options.
- genwin 12y agoHow has it done over 10 years? And that's with mega gov't help.
- jonknee 12y agoAbout the same... Over 10 years the S&P is up 83.6% excluding dividends. Going back to July so month to month comparisons are valid it looks like the annualized return is 6% excluding dividends and 8% including them. http://dqydj.net/sp-500-return-calculator/ http://dqydj.net/sp-500-return-calculator/
- genwin 12y agoAgreed. With a lot of risk for that reward. The risk shows in the volatility (ups & downs) over that time, and that the gov't had to borrow several $trillion to prevent a negative return over that time.