Those sorts of sensitivity analyses are not bad as long as one remembers there is at best one significant digit of accuracy. Those are really just illustrations rather than accurate plans in my opinion, again like MPT is useful for illustrations.larryswedroe wrote:Rod
Very much disagree about its usefulness. Example, if you see reducing your spending rate by 5% increases your odds of success by 10% that is helpful. If decreasing your equity allocation by 10% increases your odds of not running out of money by 10% but decreases your odds of leaving an estate of say $1mm by 20%, that is useful information. And similarly seeing how tilting impacts your odds of success, or allocation more to EM or international. Models are just that, like 3 factor or five factor or 7 factor models, they help us make more informed decisions in the presence of uncertainty. Understanding the flaws is also important.
You use the best tools that you have
Larry
But all those examples have nothing to do with the complaints about your opening post and thus nothing really to do with this thread.
You claimed MC was key to making use of time varying valuation based expected return models but then claim that you don't need to even think about time varying MC because the effect of time varying valuations washes out in the noise.
This is very simple. If you start and hold a low or high expected return in your MC you introduce a distinct bias relative to a real markets where the valuations vary considerably over time. Consider starting a MC back in 2001 at the top of the market boom. The expected return would be something extremely low. Now consider putting in $10,000 every year for 30 years and each year using that starting 2001 expected mean. How can that make any sense?