Indexing vs. rebalancing factor funds
I've been mulling over two approaches for equity investors who want to take a middle road. The natural route is an index fund. But how would this compare to investing 50/50 in growth and value factor funds and regularly rebalancing?
If the market ebbed and flowed between growth and value this would work nicely: you would consistently be selling high and buying low. But the market doesn't always ebb and flow; for most of the last 15 years growth outperformed value. And that is where my maths breaks down... how would an index fund have compared to pretty consistently selling rising growth and buying falling value?
Do index funds by their nature do this rebalancing? Or, if growth is in favour and P/Es are high, do index funds replicate this momentum and have a bias to growth? Or something else?
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