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From what I gather, you have assumed constant returns.

Not at all. I made a simple calculation that does not pretend to model the real world in all its glorious complexity. All it does is to give me a guide as to where I should aim. As you say, "No one knows what the future market variability will be." Adding random numbers is not much help as any illusion of accuracy that it might add just muddies the waters even more. The problem with FIRECalc is that correlation is not causation. All it does is to show what would happen if you had a time machine and travelled to the past. FIRECalc does not take into account that back then there was a half-assed gold standard and now we have genuine fiat money. Printing tons of it didn't cause the inflation everyone expected but it might have happened with gold money since gold is in short supply. Complicated models just give a false sense of certainty.

All models are simplifications of the real world. For example the Nobel Prize winning Black-Scholes Option Pricing model assumes a normal distribution of prices which is known to be wrong and you must guess the volatility between now and expiration. Maybe they should recall the Nobel Prize. Or maybe Black-Scholes is good enough to use since we have nothing better.

Denny Schlesinger
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