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Linton

Albermarle said:

ZingPowZing said:

AnotherJoe said:

Deleted_User said:

It's not a bet, it's a rebalance!

If I didn't rebalance, I'd be letting equities grow to become too large a proportion of my portfolio. I am still mostly in equities, but bonds and cash provide some ballast. That is the point of bonds, not attempting to predict short-term changes in long-term interest rates.

If equities power on up and bonds fall further, I'll be doing fine overall, and happy. OTOH, if equities fall, I'll be better cushioned and have some scope to buy more of them at lower prices.

A rebalance is still a bet, a bet that in the long run an arbitrary x/y balance will do better than some other balance.

On the anniversary of some arbitrary date.

Being relatively new to the 'science' of asset allocation , rebalancing etc , I always though that the weak point was that the asset allocation decided in the beginning was just a guess , so why bother making a fuss about rebalancing , when nobody knows whether the original asset allocation was correct or not .
I remember seeing some statistical info that showed rebalancing  made little difference anyway , especially not on an annual basis , but I can not substantiate that as I can not remember where I saw it. 

If you are trying to maximise your returns with little concern for risk then the effect of rebalancing is generally very small. For example if you are young with a safe income and investing for say 30 years time.  In those circumstances a crash is an opportunity rather than a danger.

However if you are at or near retirement and you need your investments to pay for your lifestyle continuously for perhaps 30 years then it makes sense to minimise risk and not try to over-invest in the areas you think will perform well but rather put your efforts into ensuring you are invested in as many areas as reasonably possible whilst still getting a sufficient return to meet your needs.  In those circumstances allocation is not a guess, it is a fairly simple process involving an understanding of what funds invest where and a bit of arithmetic.

[Deleted User]

Linton said:

Albermarle said:

ZingPowZing said:

AnotherJoe said:

Deleted_User said:

It's not a bet, it's a rebalance!

If I didn't rebalance, I'd be letting equities grow to become too large a proportion of my portfolio. I am still mostly in equities, but bonds and cash provide some ballast. That is the point of bonds, not attempting to predict short-term changes in long-term interest rates.

If equities power on up and bonds fall further, I'll be doing fine overall, and happy. OTOH, if equities fall, I'll be better cushioned and have some scope to buy more of them at lower prices.

A rebalance is still a bet, a bet that in the long run an arbitrary x/y balance will do better than some other balance.

On the anniversary of some arbitrary date.

Being relatively new to the 'science' of asset allocation , rebalancing etc , I always though that the weak point was that the asset allocation decided in the beginning was just a guess , so why bother making a fuss about rebalancing , when nobody knows whether the original asset allocation was correct or not .
I remember seeing some statistical info that showed rebalancing  made little difference anyway , especially not on an annual basis , but I can not substantiate that as I can not remember where I saw it. 

If you are trying to maximise your returns with little concern for risk then the effect of rebalancing is generally very small. 

Who told you that?

Rebalancing over the last decade easily could have halved the value of a portfolio.

Linton

ZingPowZing said:

Linton said:

Albermarle said:

ZingPowZing said:

AnotherJoe said:

Deleted_User said:

It's not a bet, it's a rebalance!

If I didn't rebalance, I'd be letting equities grow to become too large a proportion of my portfolio. I am still mostly in equities, but bonds and cash provide some ballast. That is the point of bonds, not attempting to predict short-term changes in long-term interest rates.

If equities power on up and bonds fall further, I'll be doing fine overall, and happy. OTOH, if equities fall, I'll be better cushioned and have some scope to buy more of them at lower prices.

A rebalance is still a bet, a bet that in the long run an arbitrary x/y balance will do better than some other balance.

On the anniversary of some arbitrary date.

Being relatively new to the 'science' of asset allocation , rebalancing etc , I always though that the weak point was that the asset allocation decided in the beginning was just a guess , so why bother making a fuss about rebalancing , when nobody knows whether the original asset allocation was correct or not .
I remember seeing some statistical info that showed rebalancing  made little difference anyway , especially not on an annual basis , but I can not substantiate that as I can not remember where I saw it. 

If you are trying to maximise your returns with little concern for risk then the effect of rebalancing is generally very small. 

Who told you that?

Rebalancing over the last decade easily could have halved the value of a portfolio.

So could (and did) investing in the best performing shares and not rebalancing 20 years ago.  That is what happens if you invest on a high return/high risk strategy.  If it goes well you are rich, if not you could lose the lot.

If your investing is merely playing with pocket money it all adds to the excitement.  However if you are dealing with your life-savings you need to take a rather different approach.