I live on fixed income investments. I own bonds and notes in S&P 500 companies (industrial, telecom, financial). I am content with a 7% annual return, although I have been doing much better than that over the last four years. I am more interested in preservation of capital. However, even though I'm in my 50's and my wife in her late 40's, we have calculated that with our spending habits, we will never draw down our funds. We are in the third year of our retirement, and we continue to save significant a significant amount of money. So we made the following changes that impact spending:
1- We do not fly coach traveling from coast to coast but I do look for deals on first/business class fares and will never pay full price. We highly recommend JetBlue Mint business class.
2- Overseas flights are exclusively on business or first class but I never pay full price and buy non-refundable business/first class fares.
- Traveling in comfort will mitigate back problems and in the end save medical bills. Plus you can't take your money with you so enjoy it.
3- No eating at dives at home or when on travel
- No reason to get sick and pay additional medical bills.
4- Won't shop at Walmart, Target, K-Mart, JC Penny, but Safeway, Publix, Costco and Home Depot are okay.
- Just kidding, I let my wife go to Walmart, Target, JC Penny
As far as "wealth effect", from June 2000 to now, the vast majority of stocks have under-performed cash stuffed in a mattress. The Dow Jones 30 back in 2000 are the the same as today. Remember the "blue chip" Dow components Eastman Kodak or Sears. Where are they now? Financial and technology stocks look good over the last few years but just go back 9 years and see why the term "Zombie Banks" applies to many financial stocks. Citibank is a $75 stock after a 10 for 1 reverse split and has to go up to $680 for people to break even after 10 years. Intel was a $74 dollar stock in 2000 and its $44 today. GE was a $48 stock and its is $17 and change today. This is after 17 1/2 years. Other have fared much worse.
I will say that the vast majority of our wealth was created slowly through real estate investments, fixed income investments, living 100% debt free, and disciplined spending habits. I don't own common stocks, mutual funds, or ETFs.