While inflation was adjusted for it was not accurately adjusted for as it ignored taxes. If your returns are 10% and inflation is 10% you get taxed on that 10% and lose money.

PS: Now if this is for 401k accounts or something that's another story.

You dont get taxed until you sell. The performance shown here is for a buy and hold strategy.

Dividends are also taxed, so even reinvesting has a cost.

Granted, IRA/401k etc exist and in years with 0-3% it's not that big a deal, but over 20 years it's often a significant cost.

Dividends are not taxed in tax-deferred accounts like IRA/401(k).

Yes, that's why I mentioned them. Sorry, if I was not clear, though they also generally have associated fees. So again, nominal breakeven is not the same as actual breakeven.

> Dividends are not taxed in tax-deferred accounts like IRA/401(k)

Only if you never withdraw them.

No, you do get taxed on dividends.

You do, but that's why dividends are becoming increasingly rare in the stock market. Many firms are preferring buybacks instead, which cause a pop in the stock price for remaining stockholders and so get taxed as capital gains.

Qualified dividends (which is most of them) are also taxed at long-term capital gains rates.

https://en.wikipedia.org/wiki/Qualified_dividend

I don't believe "dividends are becoming increasingly rare in the stock market". One measure of that is to compare the S&P 500 yield with treasury yield, the latter being near a historic low, but the S&P yield near a consistent 2% for over a decade, and quite attractive now relative to treasuries.

http://avondaleam.com/sp-500-dividend-vs-10-year-treasury-yi...

Exactly correct. From a tax management perspective, low inflation and low yields is preferable to high inflation and high yields.

I'm not sure why you are being downvoted, as the dividend component of the S&P 500 is a substantial component of the total return.

This is misleading. The question is, what is a better strategy? Like, you lose real value after this scenario, but you would have lost more if you'd have kept the money under your mattress. The only relevant question is: compared to other strategies, do you come out ahead?

I think the default option is usually to spend the money now.

If your choices are go on a 'cruse' today, or invest your money wait 15 years and then pay for a cruse waiting seems pointless. If you wait 15 years and can't pay for a cruse your clearly worse off. If you wait 15 years and can pay for a cruse and have money left over then that's an advantage to investing.

Sure, you can consider several investment strategy's. But, you can't see the future when your deciding what to do today. So, you can't say ahead of time what the best strategy is.

> While inflation was adjusted for it was not accurately adjusted for as it ignored taxes. If your returns are 10% and inflation is 10% you get taxed on that 10% and lose money.

And if you'd just put the money in a mattress you're down 10%, far more than the loss of paying taxes on 10%.

It's not wrong. We don't know how markets behave at near-zero-to-negative interest rates over long periods of time. The types of central bank policies that are in play right now are unprecedented.