I suggest you read the academic literature on this.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.
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%.
So the big benefit of using large bands only exists in rising calm markets.
Or even Vanguard's paper:
https://corporate.vanguard.com/content/ ... ancing.pdf
Statistics: Posted by watchnerd — Tue Nov 05, 2024 11:31 pm — Replies 32 — Views 2577