Sure. I agree that rebalancing to a set allocation during a significant drawdown in one asset will result in buying that asset cheaper than it was earlier and perhaps cheaper than it may be later. Image may be NSFW.For the long term, stock may grow at a higher rate than the bond. But, that may not be true in the short term with oscillation. Especially not true for the period like July 2020 t0 July 2023. Essentially, the stock just oscillate and back to the same level in that period.When you rebalance back to a set asset allocation, you sell something that has grown at a higher rate in order to buy something that has grown at a smaller rate. Less growth doesn't necessarily make something cheaper, although sometimes both things might be true at the same time.Please explain where the logic is wrong from (A) to (D)?
And, this may not have to do with rebalancing either. Someone is contributing into their 60/40 portfolio. They just buy whatever is under allocation. A 5/25 band based rebalancing usually does not happened except once in a few years. But, it happened twice in 2020, March and October.
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Statistics: Posted by Beensabu — Fri Feb 23, 2024 3:57 pm — Replies 40 — Views 3810
