Personal Investments • Total US Bond Index down more than 3% in past month, time to rebalance into BND

That's not proving that you'd be better off if you balanced less frequently.

The converse is from recent history where you didn't rebalance for a whole year and stocks gained 20% in one year.

On a 50% allocation, that would put you at 60% stocks.

(we'll pretend bonds and cash are flat just to make math easy)

But if you rebalanced at a 5% band, you would have rebalanced out of stocks at 10% gains / 55%.

All the arguments for larger bands assume a calmly rising stock market. This is not always the case. In fact if returns are choppy, volatile, and lower in the future, I would argue that smaller bands might do better. In a side ways choppy stock market, smaller bands would definitely outperform from a total return standpoint.

So the big benefit of using large bands only exists in rising calm markets.

Statistics: Posted by watchnerd — Tue Nov 05, 2024 11:31 pm — Replies 32 — Views 2577