No. of Recommendations: 6
The little math I know says that, despite the large dispersion (and corresponding low confidence), a simple average of past yearly returns is still the best (though not a good) predictor of the next year's returns. Let me know how more complexity helps.

The complexity lets you see the range of what could happen. If you believe that the average is the best predictor, then you would presumably agree that history can help to predict the future. But since the average is just that, an average, it doesn't show the variability (ups and downs) that may occur.

The more complex models, like FireCalc and Monte Carlo analysis, show you what results may occur when that variability is considered. They DO NOT claim to predict next year's returns. What DO they claim to do (and do a pretty good job of) is to predict the range of returns you may get over a particular timeframe. This is helpful if you are looking for an estimate of how long your portfolio will survive. It's not so helpful if you are looking for a prediction of next year's returns.

AJ
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