Read an interesting article this morning from the economist talking through the benefits of regular rebalancing.
I was wondering what people thoughts/ strategies were in this area and if there were any downsides to this strategy? In particular the advantages of having (what I thought) was such a high amount of bonds in the mix for a long term strategy.
The big quote for me was
‘A $1 investment in stocks in January 1926 was worth $1.81 by December 1940 (after some extreme ups and downs). Bonds did better. A dollar invested in 1926 was worth $2.08 by 1940. A buy-and-hold portfolio of 60% stocks and 40% bonds in 1926 left untouched would be worth just $1.92. But a 60-40 portfolio, rebalanced every quarter, would be worth $2.46, beating both stocks and bonds’
It doesn’t specify if this takes into account the additional fees that must currently come with rebalancing (go freetrade!) and I don’t know if market behaviours have changed significantly since the 30’s but regardless this seems to make a lot of sense. It may be obvious to those more experienced but other than to keep the risk profile the same it is something I wouldn’t have necessarily thought made such a difference!