A.I.M. Users Bulletin Board

[ls7550]

1965 to 1985 was a pretty dire time for investors, a large part of the reason why Robert Lichello devised AIM. A decade or two of flat or even down total investment real (after inflation) rewards when all of interest and dividends are being reinvested, does not bode well for those also drawing a income. Looking at UK data over those years for the no rebalance/draw 2.4% SWR from highest valued asset



and the remainder capital value just about paced inflation. But that as a remarkably good outcome compared to the alternatives. Yes nominal gains looked OK'ish over those years, but after you factor in high/rising inflation - well it was that inflation that was the killer.

And the UK endured more severe inflation than did the US.

Yearly UK inflation rate (1975 ... ouch!)
1965 4.50%
1966 3.70%
1967 2.50%
1968 5.90%
1969 4.70%
1970 7.90%
1971 9.00%
1972 7.70%
1973 10.60%
1974 19.10%
1975 24.90%
1976 15.10%
1977 12.10%
1978 8.40%
1979 17.20%
1980 15.10%
1981 12.00%
1982 5.40%
1983 5.30%
1984 4.60%
1985 5.70%

Not that we're likely to see such inflation any time soon, the main concern is that of deflation. But you never know. Early years sequence of returns risk tends to be the greater risk. Take a big hit early on and recovery + providing a income ... can be illusive.

Cash by the way in those charts = one year treasury bill yields i.e. assumes you bought a 1 year T-Bill at the start of each year. In practice Cash Deposits tend to reward more, but may not be fully protected if the bank hits problems.