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Update on the 5 Year Experiment on the "Buy and Hold" Strategy (SPY ETF vs CDs/Money Market Funds)

Results will be updated monthly:




With the current high inflation, high interest rate environment, I would like to experiment on buying and holding low risks investments such as CDs and Money Market Funds as opposed to investing in stocks for the long term.


The reason for this is simply to take advantage of the high interest rate environment without worrying about the downside risk and volatility.


We have been used to low inflation rate environment but in the most recent years, inflation has risen to levels that are at least double the ideal inflation rate (> 4%).


Source: https://www.usinflationcalculator.com/inflation/current-inflation-rates/


I checked the inflation rates historical data and found that the period where inflation was sustained over 4% was during the 1970s up to mid 1980s.


INFLATION RATE 1968-1986

Source: Macrotrend.net


During this period, the fed fund rate just moved inside the range of 4% to 20%.


FED FUND RATE 1967-1986

Source: Macrotrend.net


The S&P 500 performance during the same period is not good. It fell more than 50% from 1968 to 1982 before recovering back to its 1968 levels



S&P 500 PERFORMANCE 1968-1990

Source: Macrotrend.net



Below is my compiled list of annual inflation rate, fed rate, and spy performance for the years 1968-1985 where inflation rate was sustained at 3% and above for the majority of the period.



Had you invested $1000 at the start of 1968, the amount would have grown to $7414.71 at the end of 1994 if invested in the risk free Fed rate. Investing in SPY during the same period would led to amount of about $6599.19. SPY needed 28 YEARS to outperform the risk free Fed rate.


































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