Vanguard targeted retirement funds

retiringtoosoon

Your correct what?

Audaxer

NoMore said:

You say the market trends up over time (I agree) so you can't compare it statistically to a 50 50 chance, as for it to trend upwards over time their must be a bias in positive returns, therefore resulting in more up years then down years (or any defined period to compare).

Your correct that previous years performance doesn't affect future performance, but there must inherently be a bias to positive returns for an upward trend over time to occur, again leading to the conclusion that its more likely to be positive than negative. How much more likely, I don't know.

I agree, but presumably you could also have a 5 year period with say 3 negative years but where losses were relatively low, and 2 positive years where gains were relatively high, which still resulted in an overall upward trend over the 5 years.

Pat38493

NoMore said:

You say the market trends up over time (I agree) so you can't compare it statistically to a 50 50 chance, as for it to trend upwards over time their must be a bias in positive returns, therefore resulting in more up years then down years (or any defined period to compare).

Your correct that previous years performance doesn't affect future performance, but there must inherently be a bias to positive returns for an upward trend over time to occur, again leading to the conclusion that its more likely to be positive than negative. How much more likely, I don't know.

I was reading some of those ERN blogs a couple of weeks ago - he seems to be a qualified statistician and economist and he writes extensively about his claim that the stock market is not a "random walk" in the sense that many monte carlo simulations assume - i.e. like a standard deviation.  He claims that stock markets have a kind of elastic tendency to swing more quickly back towards their previous high than a random deviation would normally expect - at least this is what all available historic data shows.

Of course even if true it is probably only when you take aggregates across large parts of the market.

[Deleted User]

Pat38493 said:

NoMore said:

You say the market trends up over time (I agree) so you can't compare it statistically to a 50 50 chance, as for it to trend upwards over time their must be a bias in positive returns, therefore resulting in more up years then down years (or any defined period to compare).

Your correct that previous years performance doesn't affect future performance, but there must inherently be a bias to positive returns for an upward trend over time to occur, again leading to the conclusion that its more likely to be positive than negative. How much more likely, I don't know.

I was reading some of those ERN blogs a couple of weeks ago - he seems to be a qualified statistician and economist and he writes extensively about his claim that the stock market is not a "random walk" in the sense that many monte carlo simulations assume - i.e. like a standard deviation.  He claims that stock markets have a kind of elastic tendency to swing more quickly back towards their previous high than a random deviation would normally expect - at least this is what all available historic data shows.

Of course even if true it is probably only when you take aggregates across large parts of the market.

Of course. Many people, including some highly qualified, claim that its not a “Random Walk”. Otherwise there would be no “technical analysis” because its astrology. Nor would we have investment advisors. Because they can’t add value without taking on additional risk. In my opinion short term movements shouldn’t matter for long term investors so irrelevant. And while we don’t have enough historic data to statistically predict long term returns, all theories other than Random Walk have been disproven. Which leaves… Random Walk.

engagedandopen

There is no actual guarantee a given equity or bond investment will increase in value in the future.  All our sense that overall markets rise is based on looking backwards, confidence in economists and hoping for the best.  With Vanguard's set-it-and-forget-it funds, this is especially the case (they review the strategic allocation annually and do not apply tactical tilts ever).