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Should You Even Bother To Rebalance Your Portfolio?

TedTed
in Fund Discussions
FYI: Investors often ask, “When should I rebalance my portfolio?” Most are looking for a perfect time of year. Others want to know if they should rebalance once a year, once a quarter, or during every full moon.

Vanguard back-tested a portfolio that was split 60/40 between U.S. stocks and U.S. bonds between 1926 and 2009. They didn’t bother with lunar cycles. But they did test four scenarios: rebalancing the portfolio monthly, quarterly, annually and never.
Regards,
Ted
https://assetbuilder.com/knowledge-center/articles/should-you-even-bother-to-rebalance-your-portfolio

Comments

  • davidrmorandavidrmoran
    So does his last sentence really follow?
  • hank
    edited January 2016
    That extra 1% by not rebalancing resulted in a stark difference with the non-rebalanced portfolio worth more than double the one which was frequently rebalanced at the end. I'm shocked 1% compounded could make that kind of difference.

    However, from 1926 - 2009 is a longer investment horizon than most of us have (approximately 83 years). To achieve the identical result one would need to have accumulated all the money initially invested by age 12 and than to have waited until age 95 to withdraw a single penny.

    Anybody here fit that description?
  • Old_JoeOld_Joe
    Ted.
  • hank
    edited January 2016
    Hey OJ, Just re-did my earlier math. - Actually, Ted would need to have waited until 95 to satisfy the 83-year time-frame and begin withdrawing $$. Do you suppose?:)
  • heezsafe
    @hank Aw, but it was such a Happy Story! Geez, every crowd has its killjoy.:)
  • BobCBobC
    I just do not put much stock in a massively long time frame like that. At least 90% of that time was prior to computerized trading and 24-hour negative news. And the last 30 years were a bull market for bonds. I would like to see the same thing done over the last 10 years. We are rebalancing accounts, with a few adjustments: replacing a handful of funds, increasing international allocation a bit, pulling some fixed-income dollars to market neutral, and emphasizing dividends more than the last few years.
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