Nominally S&P500 did 23% in the 70s, and 2.08% annualised, but financial returns are not just the stock prices, they're also dividends.
If you include and reinvest dividends, you'd have made 83% in the decade and 6.2% per year.
Its true inflation was high though, and an investment in Jan 1970 would've in real terms returned -1.1% a year after adjusting for inflation. If you continued investing equal amounts each year from 1970 to 1980, it'd actually be about -0.5%.
But no investment would've meant you lost half of all your money due to 7% average inflation, so investing would've been a pretty good idea, offsetting almost all inflation in the worst decade 50 years ago.
Also it's common knowledge to do a stock/bond split. Bond returns fared a bit better. -- and it should be said, the following decade inflation came way down and in nominal terms the S&P500 did +364% with dividends reinvested.
I do agree with your general point though, you can't just rely on a 10% annual average and spend that amount. The commonly referenced safe withdrawal rate (WR) of 4% is 2.5x less than the average S&P500 return for a good reason (based on a ton of monte carlo sims that indeed would lead to disastrous results at 10% WR in the 1970s).
Nah not really.
Nominally S&P500 did 23% in the 70s, and 2.08% annualised, but financial returns are not just the stock prices, they're also dividends.
If you include and reinvest dividends, you'd have made 83% in the decade and 6.2% per year.
Its true inflation was high though, and an investment in Jan 1970 would've in real terms returned -1.1% a year after adjusting for inflation. If you continued investing equal amounts each year from 1970 to 1980, it'd actually be about -0.5%.
But no investment would've meant you lost half of all your money due to 7% average inflation, so investing would've been a pretty good idea, offsetting almost all inflation in the worst decade 50 years ago.
Also it's common knowledge to do a stock/bond split. Bond returns fared a bit better. -- and it should be said, the following decade inflation came way down and in nominal terms the S&P500 did +364% with dividends reinvested.
I do agree with your general point though, you can't just rely on a 10% annual average and spend that amount. The commonly referenced safe withdrawal rate (WR) of 4% is 2.5x less than the average S&P500 return for a good reason (based on a ton of monte carlo sims that indeed would lead to disastrous results at 10% WR in the 1970s).