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

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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.
I suggest you read the academic literature on this.

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



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