Safe margin of 2.5x to 3x income, 100% long bond portfolio, built in inflation offset

[FIRE'd@51]

The idea of a ladder is to get a rolling average without ever losing principal.

How do you withdraw 1.75% real from a ladder earning less than 1.75% real and not lose real principal? And that's before taxes.

 

[daylatedollarshort]

How do you withdraw 1.75% real from a ladder earning less than 1.75% real and not lose real principal? And that's before taxes.

I posted "Some posters here can live off income steams like rental income or pensions alone and may be happy with just making a riskless 0% real return on their portfolios." YMMV.

The OP can look at what returns he could get in TIPS relatively risk free and decide how much risk he is willing to take on from there for the potential of a greater return but without the inflation protection of guaranteed return of principal.

 

[brewer12345]

How do you withdraw 1.75% real from a ladder earning less than 1.75% real and not lose real principal? And that's before taxes.

Money fairy.

 

[Katsmeow]

I posted "Some posters here can live off income steams like rental income or pensions alone and may be happy with just making a riskless 0% real return on their portfolios." YMMV.

And, that is the thing. Yes, there are people who have so much money -- either from rental income or pensions or just having a humongous portfolio that they can spend what they want to (that is, an acceptable lifestyle to them) and they don't care if they get any return on their portfolio.

That is, give me a portfolio of $10,000,000 and a plan that has to last 30 years and even considering inflation I don't really care what the portfolio earns. I can stick the money in a mattress and won't run out.

The thing is that most people don't have that situation.

What I don't like about the whole "if you've won the game why keep playing mantra" is that it implicitly says that if you need to have a return from your portfolio in order to retire at your desired level then you haven't won the game and you are, in fact, a loser.

Basically, if you need to invest in equities for portfolio return so that the portfolio isn't eaten away by inflation then you haven't "won the game" and you are a loser.

By that standard, then I will say that I am a loser. I can't afford to have my portfolio earning a 0% real return and I can't afford to have my portfolio eaten away by inflation.

To have that kind of portfolio I would have had to worked for many additional years as would DH.

We aren't afraid of equities. We don't equate low volatility with low risk. I see the OP's portfolio as way more risky than a diversified portfolio with some equities.

Yes, it would be nice to be able to say that my portfolio could loss half its value due to inflation and I could get 0% real return and I would still have so much money that I could withdraw enough to meet all my spending needs for the rest of my life.

But, like probably most people, I can't say that. I don't have that kind of wealth. But, I don't feel I need to work another 10 years to get that kind of wealth just so I can avoid having any equities. To the extent there is risk from equities, I would rather take that risk than have to work another 10 years.

But -- to be clear -- I think the risk of inflation is one that is often underestimated by many who refuse to have any equities (not saying that is you, but it is some people).

I don't consider having equities, by the way, as a form of "playing." I consider having a diversified portfolio as a way to reduce overall risk, including inflation risk.

 

[daylatedollarshort]

The "won the game" phrase is the term Bill Bernstein uses, is used frequently on Bogleheads and other financial writers have used the phrase. I am sorry you do not like it but I did not originate it. The "won the game" phrase appears 123 times on the Google indexed pages for the Boglehead forum alone.

Here are some references:

If you've won the game, stop playing - MarketWatch

Asset Allocation Guide: How much risk do you need? - CBS News

Why Keep Playing The Stock Market Game If You Already Won?

http://whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/?print=pdf

It does not refer to having $10M. It generally refers to retiring with 25 X living expenses saved up at retirement and then no longer taking a risk with that amount of money. If you move to Mexico your won the game amount could be $500K or you could have won the game if you are 62+ and can live happily on less than your SS checks.

As for keeping up with inflation, TIPS and I bonds are indexed to inflation (before taxes) while stocks do not have the same guarantee:

"By contrast, during the five periods of high inflation since 1940, as defined by a jump in the CPI of more than 8.5% year over year, the S&P 500 fell an average of 2.15%. The inflationary periods averaged 21 months, compared with 10 months for the deflationary periods."

From: http://online.wsj.com/news/articles/SB10001424052748703466704575489942194044712

 

[Katsmeow]

The "won the game" phrase is the term Bill Bernstein uses, is used frequently on Bogleheads and other financial writers have used the phrase. I am sorry you do not like it but I did not originate it.

I did not think that you originated it. I'm sorry I wasn't clear about that. I am aware that others use that phrase. I dislike their use of it for the reasons I stated.

AS far as 25x living expenses --

First - I don't think that even having that would allow one to safely have a 0 equities portfolio. I don't think you can withdraw 4% per year with zero equities which is what 25x living expenses would require without any SS or pension. So, I don't think those advocating zero equity portfolios are seriously advocating a 4% withdrawal rate in today's environment. Most of the zero equity portfolios that I've seen require a portfolio far in excess of 25x living expenses.

Second - I also think that for people at or near SS age that it isn't necessary to have a portfolio of 25x expenses. I think it is perfectly reasonsable to think that some of the expenses will be covered by SS.

 

[daylatedollarshort]

I did not think that you originated it. I'm sorry I wasn't clear about that. I am aware that others use that phrase. I dislike their use of it for the reasons I stated.

AS far as 25x living expenses --

First - I don't think that even having that would allow one to safely have a 0 equities portfolio. I don't think you can withdraw 4% per year with zero equities which is what 25x living expenses would require without any SS or pension. So, I don't think those advocating zero equity portfolios are seriously advocating a 4% withdrawal rate in today's environment. Most of the zero equity portfolios that I've seen require a portfolio far in excess of 25x living expenses.

Second - I also think that for people at or near SS age that it isn't necessary to have a portfolio of 25x expenses. I think it is perfectly reasonsable to think that some of the expenses will be covered by SS.

If you need 100K in retirement expenses, and you have $2.5M saved up (or equivalent paid out as pensions, SS or annuities or guaranteed income like rental properties or royalties). Then all you have to get is 0% real and theoretically you have enough. Or $40K and $1M.

$2.5M / 25 years = $100K per year investing at 0% real. Or $600K / 25 = $24K. It is The Money or Your Life approach, only the book did not allow for inflation, which could be solved by substituting TIPS or I bonds for the Treasuries.

Personally I would use more than 25 years and not go to zero, but the basic idea stays the same.

 

[Katsmeow]

If you need 100K in retirement expenses, and you have $2.5M saved up (or equivalent paid out as pensions, SS or annuities or guaranteed income like rental properties or royalties). Then all you have to get is 0% real and theoretically you have enough. Or $40K and $1M.

$2.5M / 25 years = $100K per year investing at 0% real. Or $600K / 25 = $24K. It is The Money or Your Life approach, only the book did not allow for inflation, which could be solved by substituting TIPS or I bonds for the Treasuries.

Personally I would use more than 25 years and not go to zero, but the basic idea stays the same.

Well, I don't think most people interested in early retirement want to plan for a 25 year retirement...

And, if you did want to plan for a 25 year retirement, then you do have to account for inflation. I question the 0% real with a zero equity portfolio at this time.

 

[MooreBonds]

As for keeping up with inflation, TIPS and I bonds are indexed to inflation (before taxes) while stocks do not have the same guarantee:

"By contrast, during the five periods of high inflation since 1940, as defined by a jump in the CPI of more than 8.5% year over year, the S&P 500 fell an average of 2.15%. The inflationary periods averaged 21 months, compared with 10 months for the deflationary periods."

From: http://online.wsj.com/news/articles/SB10001424052748703466704575489942194044712

And if you look at the dividend yield on that same S&P 500 index:

S&P 500 Dividend Yield

you'll see that the dividends alone have thrown off typically more than 3%. In fact, only since around 1985 onward has the yield shrunk considerably below the previous historical average of 3.5%+ (with correspondingly low inflation).

So even if the index price had dropped during inflationary periods, the dividends alone were giving you 3.5%+....which is just about equal to the oft-cited 4% SWR for a 30 year period, and would not have required you selling much (if any) equities.

 

[Quantum Sufficit]

Excellent points, the one lesson I have learned (often over and over again) is in the world of investing all investment have risk. If you think otherwise you don't understand the investment.

A couple of years ago, a Warren Buffett described bonds as offering "return free risk". As a general rule if you find your doing the opposite of Warren Buffett suggests, you'd be very well advised to ask yourself what do I know about investing that Oracle of Omaha doesn't.

The other thing I am really curious to find out from the OP and to a less extent Earl is why is having a modest say 1/3 (like Wellseley) of your assets in stock so terrifying? I am not arguing I am just trying to understand why it's scary.

Its not that it is scary at a 10% stock allocation (1/3 of 1/3), I just think plenty of risk in equities does not make me "warm and fuzzy" as another poster said above. I think I like this plan because month after month, the dividends roll in. I am looking at (with part time 3k per month) having FOUR TIMES my expenses on a monthly basis. I just like that buffer and it allows me to reinvest dividends probably monthly to continue to increase my income stream.

 

[Quantum Sufficit]

This is an interesting thread. I used to have a similar approach as OP only I was thinking of 100% long term muni-bonds at the time. After advice on FIRE and other resources, I have changed my approach. Having said that, I can relate with the OP that the stock market ups and downs (mainly the downs) gives me a lot of trepidation. I currently invest much of my bond allocation in Vanguard BND which is low risk (and at the same time relatively low reward) and balance that with domestic and international stock ETFs. Here is my question for the OP. I looked up Vanguard Long term Corporate bond fund – I assume we are talking VCLT – so I could compare it to BND for my own edification. It appears that VCLT invests 46.5% in baa rated bonds (does not give me a warm fuzzy), has an average maturity of 24 years (not great for inflation), holds only 1333 bonds (relatively low compared to BND), and has been around for less than 5 years (not long term data). If you are putting 100% of your eggs in one low risk basket/fund, is this one really low risk?

Thank you for the reply to my question. I would compare bnd to vwetx, as that is what I own.

Duration is 12.5 years, which means 2 full percentage increase means a 25% drop in NAV. The same could easily occur in a 50/50 mix of stock and bond (and did so in 2008). This fund has an average credit quality of "A" and 85% of the secuities in the fund are "A" or higher.

 

[daylatedollarshort]

Well, I don't think most people interested in early retirement want to plan for a 25 year retirement...

And, if you did want to plan for a 25 year retirement, then you do have to account for inflation. I question the 0% real with a zero equity portfolio at this time.

Then you would change that to 40 or 50 or whatever you need. No one is trying to talk you into changing your AA if this methodology does not work for you. The OP expressed an interested in an a fixed income portfolio.

I am not sure what there is to question, though. To make it simple, if you didn't have pensions or SS or other income steams and you planned for a 50 year retirement and needed $2M total, as long as your investments kept pace with your personal inflation rate, 50 X $40K = $2M. In the real world, you would adjust for pensions, SS, long term care, leaving an estate, etc. but the basic math stays the same.

 

[Quantum Sufficit]

Hello Quantum,
This bond fund appears to match the description of VWESX, a Vanguard long term bond fund. Do I have this right? Anyway, the price and dividends match up with your numbers.

My situation is closer to your situation than many others on this forum. While I have some equities, (40%), it is a lot less than most on the forum.

The way I see it, to retire, we need to approximately cover our living expenses + inflation. Bonds are much more predictable and less volatile then stocks are. The simple math, for me, is to consider stocks returning about 10% long term and bonds returning about 3%. A weighted averaged of 60% bonds + 40 % stocks produces a return of about 5.8%. This provides 3.5% to live off of and 2.3% for inflation.

In your case, the weighted average is simply the present return on that fund, which is about 4.5%. You seem to be able to live off of only about 1/2 of that amount providing about 2.2 or 2.3% for inflation. If this is what you expect for inflation, as I believe it is, then we'll both come out approximately o.k.

Another way to look at this is to compare the combined expected growth of money invested in 10% - 40% total stock fund + balance in VWESX, what you have, against a 100% invested in VWESX. If you ran this simulation, you'll likely find that the dips and peaks will be less volatile as you increase the % in stocks up through about 20% stocks (the minimum volatility %) and then the volatility increases again. Thus, by going with 20% of your investments in a total stock fund, you would have similar overall returns without having to watch declines in your total net worth.

Just my 2 cents, for what it is worth.

Thank you Sbwitte, that was quite helpful.

 

[photoguy]

The "won the game" phrase is the term Bill Bernstein uses, is used frequently on Bogleheads and other financial writers have used the phrase.

It does not refer to having $10M. It generally refers to retiring with 25 X living expenses saved up at retirement and then no longer taking a risk with that amount of money. If you move to Mexico your won the game amount could be $500K or you could have won the game if you are 62+ and can live happily on less than your SS checks.

I want to comment on the phrase "won the game".

Specifically, I don't think Berstein or anyone else would say having just 25x living expenses is having "won the game" for an early retiree. At 25x you're clearly at risk of running out of money for 30-40-50 year time frame that an early retiree needs to plan for no matter what your portfolio composition.

Based on his posts/writings, I would guess "won the game" is somewhere between 40-50x expenses. Here's a quote from him: "Two percent is bulletproof, 3% is probably safe, 4% is pushing it and, at 5%, you're eating Alpo in your old age." So 25x is "pushing it".

Another thing to keep in mind is that Berstein's clients have a minimum net worth of 25M. So that they could easily put 20-25x of yearly expenses in bonds and still have a huge amount in equities to cover inflation and longevity risk.

 

[daylatedollarshort]

I want to comment on the phrase "won the game".

Specifically, I don't think Berstein or anyone else would say having just 25x living expenses is having "won the game" for an early retiree. At 25x you're clearly at risk of running out of money for 30-40-50 year time frame that an early retiree needs to plan for no matter what your portfolio composition.

Based on his posts/writings, I would guess "won the game" is somewhere between 40-50x expenses. Here's a quote from him: "Two percent is bulletproof, 3% is probably safe, 4% is pushing it and, at 5%, you're eating Alpo in your old age." So 25x is "pushing it".

Another thing to keep in mind is that Berstein's clients have a minimum net worth of 25M. So that they could easily put 20-25x of yearly expenses in bonds and still have a huge amount in equities to cover inflation and longevity risk.

He used 20 - 25 X expenses in this article. The whole methodology is summarized by white coat investor:

http://whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/?print=pdf

There are many great reasons for investing in stocks as posters here have pointed out. But there are also valid reasons some retirees aren't as interested in stocks, including the stomach churning mentioned in the article below. The article below is from 2011. I know stock have done very well since it was written, but it doesn't change the returns during the time periods specified in the article, which could involve longer period of returns than some of us have left on earth.

Stocks for the Long Run - The Biggest Urban Legend
https://www.researchaffiliates.com/...es/F_2011_March_The_Biggest_Urban_Legend.aspx

"Where is the wealth creation implied by the Ibbotson data? Stock market investors took the risk—riding out every bubble, every crash, every spectacular bankruptcy and bear market, over a 30-year stretch. How much were they compensated for the blood, sweat, and tears spilled with all this volatility? A measly 53 basis points per annum! Indeed, those that have incurred the ups and downs over the past decade have lost money compared to what they could have earned from long-term government bonds. They’ve paid for the privilege of incurring stomach-churning risk. Not only did Treasury bond investors sleep better, they ate better too! A 30-year stock market excess return of approximately zero is a huge disappointment to the legions of "stocks at any price" long-term investors."

 

[papadad111]

Good question. I think you have gotten some good answers (and frankly some pretty snarky/snippy answers too...maybe from some retirees who need to change their meds or something -- not typical of this forum !!).

I think you're really driving at piece of mind...which makes sense when you've worked hard all your life and want to try to preserve retirement. You already went down the annuity path and realized it's not a good deal when handing over such a chunk of principle. But..some do this because they have no heirs, they spread it across multiple insurance companies, and forget about it..

I do think a diversified retirement portfolio is important. the key here is that no strategy is risk free. diversification reduces risk (modern portfolio theory). Thus, having some equities, some bonds, some gold, some real estate etc all help with risk mitigation.

Since you only NEED about half what a bond yield would produce in cash flow/income stream, maybe put half in 30 year long bonds (to cover what you NEED) and the rest in equities and other alternatives to cover the incremental (to keep up with inflation, etc). Break the nest egg into a couple or three traunches and manage it that way.

 

[photoguy]

He used 20 - 25 X expenses in this article. The whole methodology is summarized by white coat investor:

In the original CNN article that the white coat investor article summarizes (available on archive.org), Berstein is making the statements in the context of an "end of career" retiree with "no human capital" that is "late in life".

His whole goal is to create a liability matching portfolio for the rest of your life's expenses. And if you can do this in safe bonds you've won the game.

This is might be feasible with 20-25 years of expenses for a normal age retiree (say age 65-70) because longevity risk is less of an issue. But for an early retiree, having just 20-25 years of expenses is simply not going to cut it.

As an aside, I question whether 20-25 years is even sufficient for a normal age retiree. The drawback of his liability matching portfolio is that the liability (yearly expenses x remaining lifespan) cannot be known precisely. And putting everything into safe assets guarantees you will run out of money if you happen to live an extra decade or s*** hits the fan and you have large unexpected expenses.

 

[daylatedollarshort]

In the original CNN article that the white coat investor article summarizes (available on archive.org), Berstein is making the statements in the context of an "end of career" retiree with "no human capital" that is "late in life".

His whole goal is to create a liability matching portfolio for the rest of your life's expenses. And if you can do this in safe bonds you've won the game.

This is might be feasible with 20-25 years of expenses for a normal age retiree (say age 65-70) because longevity risk is less of an issue. But for an early retiree, having just 20-25 years of expenses is simply not going to cut it.

As an aside, I question whether 20-25 years is even sufficient for a normal age retiree. The drawback of his liability matching portfolio is that the liability (yearly expenses x remaining lifespan) cannot be known precisely. And putting everything into safe assets guarantees you will run out of money if you happen to live an extra decade or s*** hits the fan and you have large unexpected expenses.

Quantum Sufficit's question was: "Tell me, why do I need the stock market in MY PARTICULAR SCENARIO? " Check out his net worth, SS benefit amounts, paid for house, health stipend, part-time income and his expenses in his first post. Some people are going to want to save less and take on more risk than the Bill Bernstein safe asset's approach, but I think it could work well for those with high enough assets or other retirement income streams in relation to retirement spending.

I personally plan for living over age 100, so years to cover would be something like 110 - current age. I don't want to find out at 90 that I am still healthy and could live a decade or more, but unemployable and running out of money.

 

[papadad111]

"As an aside, I question whether 20-25 years is even sufficient for a normal age retiree. The drawback of his liability matching portfolio is that the liability (yearly expenses x remaining lifespan) cannot be known precisely. And putting everything into safe assets guarantees you will run out of money if you happen to live an extra decade or s*** hits the fan and you have large unexpected expenses."


This is why annuitizing (or social security or pension payout) is beneficial as well - more diversification to help protect "against" longevity and the associates financial burden

 

[Zathras]

...
Stocks for the Long Run - The Biggest Urban Legend
https://www.researchaffiliates.com/...es/F_2011_March_The_Biggest_Urban_Legend.aspx

"Where is the wealth creation implied by the Ibbotson data? Stock market investors took the risk—riding out every bubble, every crash, every spectacular bankruptcy and bear market, over a 30-year stretch. How much were they compensated for the blood, sweat, and tears spilled with all this volatility? A measly 53 basis points per annum! Indeed, those that have incurred the ups and downs over the past decade have lost money compared to what they could have earned from long-term government bonds. They’ve paid for the privilege of incurring stomach-churning risk. Not only did Treasury bond investors sleep better, they ate better too! A 30-year stock market excess return of approximately zero is a huge disappointment to the legions of "stocks at any price" long-term investors."

Bold added.
Usually I only see such blatant logical fallacies in GW arguments.
I am 97% equities and have been since 2007.
I incurred no stomach churning risk and have slept extraordinarily well.

While it is true equities can fluctuate quite a bit, attributing emotion to those fluctuations is not a valid argument.

 

[photoguy]

Quantum Sufficit's question was: "Tell me, why do I need the stock market in MY PARTICULAR SCENARIO? "

I agree the OP probably has enough money/income to make his situation work. I was mainly commenting on what it means to have won the game for an early retiree.

Still the OP is not investing in what Berstein would call safe assets for a won-the-game portfolio:

"This portfolio should be in safe assets: Treasury Inflation-Protected Securities, annuities, or even short-term bonds."

As others have noted, his portfolio (long corp bonds) is still open to inflation/other risks which he doesn't need to take.

This is why annuitizing (or social security or pension payout) is beneficial as well - more diversification to help protect "against" longevity and the associates financial burden

That's a good point about annuities. But I wonder if it is feasible to buy an inflation adjusted annuity at a reasonable cost? I haven't looked into pricing (I am way to far away for mortality credits to help) but it seems like when I read about it most are buying non-inflation adjusted annuities (that could just be my perception though).

 

[papadad111]

Not sure about inflation adjusted annuities. Some could argue that social security is inflation adjusted via annual cola calculations. Some pensions have a cola adjustment too but getting less common these days

One of my colleagues has Been contemplating how best to be taking own small pension - his choice is 1050/ month for life non cola'd starting at age 65. Or take a lump sum of about 75k now at age 46. Conventional wisdom says lump sum is better. However his family had good longevity and all his other eggs aside SS are in lump sum 401k/IRA type accounts. He likely will take the monthly payouts just to diversify his sources of money later in life. If all goes to cr@p in the next 15 or 20 years like a protracted down stock market , or bad first few years of early retirement, or if he loses it all ( or half of it) then he figures that he still has SS + a small pension = plan b which he can rely on. At least that's his theory. Seems reasonable to hedge.

 

[Quantum Sufficit]

And, that is the thing. Yes, there are people who have so much money -- either from rental income or pensions or just having a humongous portfolio that they can spend what they want to (that is, an acceptable lifestyle to them) and they don't care if they get any return on their portfolio.

That is, give me a portfolio of $10,000,000 and a plan that has to last 30 years and even considering inflation I don't really care what the portfolio earns. I can stick the money in a mattress and won't run out.

The thing is that most people don't have that situation.

What I don't like about the whole "if you've won the game why keep playing mantra" is that it implicitly says that if you need to have a return from your portfolio in order to retire at your desired level then you haven't won the game and you are, in fact, a loser.

Basically, if you need to invest in equities for portfolio return so that the portfolio isn't eaten away by inflation then you haven't "won the game" and you are a loser.

By that standard, then I will say that I am a loser. I can't afford to have my portfolio earning a 0% real return and I can't afford to have my portfolio eaten away by inflation.

To have that kind of portfolio I would have had to worked for many additional years as would DH.

We aren't afraid of equities. We don't equate low volatility with low risk. I see the OP's portfolio as way more risky than a diversified portfolio with some equities.

Yes, it would be nice to be able to say that my portfolio could loss half its value due to inflation and I could get 0% real return and I would still have so much money that I could withdraw enough to meet all my spending needs for the rest of my life.

But, like probably most people, I can't say that. I don't have that kind of wealth. But, I don't feel I need to work another 10 years to get that kind of wealth just so I can avoid having any equities. To the extent there is risk from equities, I would rather take that risk than have to work another 10 years.

But -- to be clear -- I think the risk of inflation is one that is often underestimated by many who refuse to have any equities (not saying that is you, but it is some people).

I don't consider having equities, by the way, as a form of "playing." I consider having a diversified portfolio as a way to reduce overall risk, including inflation risk.

"...I don't consider having equities, by the way, as a form of "playing." I consider having a diversified portfolio as a way to reduce overall risk, including inflation risk"

So too did those holding diversified portfolios in 1966. They had to wait many years (not including reinvested dividends ---how many IN RETIREMENT reinvest dividends) to get back to even. I guess every approach has risk, you and I are just picking different risks. I like the idea of starting with 3 x my current annual needs. Like you, I could work longer but, as you might guess from my screen name, "enough is good enough".

 

[daylatedollarshort]

In his latest book, "Stop Acting Rich" one of the the Millionaire Next Door authors wrote that most millionaires do not have more than low to mid twenty percent range of their net worth in publicly traded equities. He bases that number of his studies and says it is confirmed by IRS data, which has the best data set on millionaires in the world.

In his recent book he states that, "Real safety is not in a diversified stock portfolio. One of the reasons millionaires are successful is that they think differently. Many a millionaire has told me that true diversity has much to do with controlling one's investments; no one can control the stock market."

On a related note, this chart from the NY Times shows how investing and withdrawals at different points in time may impact returns:

http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html?_r=1&#top

"After accounting for dividends, inflation, taxes and fees, $10,000 invested at the end of 1961 would have shrunk to $6,600 by 1981. From the end of 1979 to 1999, $10,000 would have grown to $48,000.

“Market returns are more volatile than most people realize,” Mr. Easterling said, “even over periods as long as 20 years.”

 

[eta2020]

"After accounting for dividends, inflation, taxes and fees, $10,000 invested at the end of 1961 would have shrunk to $6,600 by 1981. ”

S&P 500 Return Calculator - Don't Quit Your Day Job...

Buy and hold would had made annual profit of 1.327 for total profit of 30%.
That is AFTER inflation.

I guess somebody did ton and ton of trading and racked up lot of fees and taxes :face palm: