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Rebalancing portfolio vs only using "risk-off" in a crash?
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You have to change your life
Posted: 18 November 2024 21:25:36(UTC)
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ben ski;326121 wrote:
You have to change your life;326118 wrote:
ben ski;326117 wrote:

The main reason for regular rebalancing is to avoid *style drift*. So if stocks were up 1,000%, your cash wouldn't be 25% anymore. It would be closer to 2.5%. So it wouldn't be much use to buy the dip with.

Which is to say: You don't know why things have changed, so double down on things going back to a familiar pattern.



In long-term backtests, rebalancing every 19 months tends to be about optimal.


Oh yeah, that will work.


If you can't be bothered to explain what you mean.



I was being sarcastic. What I mean is, it won't work.

How could reverting to a random date template every 19 months be expected to work in future? You're not describing the El Nino or the transit of Halley's Comet. It's just - what's word? - backfitting.
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Jay P on 18/11/2024(UTC)
Thrugelmir
Posted: 18 November 2024 22:15:25(UTC)
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ANDREW FOSTER;326116 wrote:


I think the question olnly arises as long as we are in relatively high interest rates.


Relative to what? Historically they are normal. UK mortgage rates remain low for example. Well below the pre GFC 2007 watershed.
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Jay P on 18/11/2024(UTC), SF100 on 18/11/2024(UTC)
ben ski
Posted: 18 November 2024 23:31:11(UTC)
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You have to change your life;326122 wrote:
ben ski;326121 wrote:
You have to change your life;326118 wrote:
ben ski;326117 wrote:

The main reason for regular rebalancing is to avoid *style drift*. So if stocks were up 1,000%, your cash wouldn't be 25% anymore. It would be closer to 2.5%. So it wouldn't be much use to buy the dip with.

Which is to say: You don't know why things have changed, so double down on things going back to a familiar pattern.



In long-term backtests, rebalancing every 19 months tends to be about optimal.


Oh yeah, that will work.


If you can't be bothered to explain what you mean.



I was being sarcastic. What I mean is, it won't work.

How could reverting to a random date template every 19 months be expected to work in future? You're not describing the El Nino or the transit of Halley's Comet. It's just - what's word? - backfitting.


When you say 'work', what is it you think rebalancing is supposed to do? (how I wind up talking to these primates)
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SF100 on 19/11/2024(UTC)
Elspeth Beaton
Posted: 18 November 2024 23:43:19(UTC)
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I meant to add as a PS that the same system as I mentioned Ie very little if any rebalancing -works just as well in the Accumulation phase for those youngsters amongst us
ie take your set Asset Allocation and maintain its integrity by how you invest your new savings -add your new monies to ruthlessly keep the chosen Asset Allocation intact
In practice over 30+ years of investing I found that I never have rebalanced except during new monies additions to my portfolio ( once a year?) or money withdrawals in retirement from my portfolio (once a year also?)
Turns out I have been rebalancing once a year in practice
I am a very passive investor however which is not everyone’s “cup of tea”!
xxd09
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SF100 on 19/11/2024(UTC), dlp6666 on 05/03/2025(UTC)
You have to change your life
Posted: 19 November 2024 09:23:56(UTC)
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ben ski;326127 wrote:


In long-term backtests, rebalancing every 19 months tends to be about optimal.

When you say 'work', what is it you think rebalancing is supposed to do? (how I wind up talking to these primates)


Good morning,

You state The advantage is that it doesn't really matter if you get it right or not - meaning the, um, intangible benefits compensate rebalancing at a bad time.

Rebalancing may reap all sorts of psychological benefits , I have no truck with any of that. But I think "about optimal" implies higher performance.

Rebalancing does not by itself generate a better outcome and there is no reason random dates and intervals should continue to defy gravity.

The volatility harvesting you mention does work, but only for big houses with a latency advantage. I advise any reading PI to steer well clear, it would be the quick way to the poorhouse.
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