Q: I didn't know where to post my comment as the forum sections seems very inactive.
What this post is about is the article you sent us entitled: 'The Portfolio Management Assumptions that Harm Clients'.
Very excellent article IMHO. I am not a portfolio rebalancer and never have been. In his article he writes and I quote:
"We may rebalance periodically – quarterly for example – or we may set percentage boundaries around each asset class and rebalance when they are exceeded. Either way, the underlying assumption is that our target allocation is better than the allocation the markets have given us.
Research on the value of rebalancing suggests that it has little ability to increase returns or decrease risk. Whatever utility exists depends on factors such as time period, the direction of the market and the relative future expected returns of the asset classes being rebalanced. Yet few, if any, of us take these factors into account in developing our rebalancing strategies. Instead, we employ simple, mechanical rebalancing strategies that add little or no value and may even detract from long-term performance.
The only thing we can be sure about is that our rebalancing strategies result in transaction and tax costs."
5i constantly encourages/recommends that we rebalance our holdings especially when one becomes more weighted than say approx. 5%.
I feel the writer has a very interesting POV and would like to ask you to let us know how you feel about his POV on rebalancing.
What this post is about is the article you sent us entitled: 'The Portfolio Management Assumptions that Harm Clients'.
Very excellent article IMHO. I am not a portfolio rebalancer and never have been. In his article he writes and I quote:
"We may rebalance periodically – quarterly for example – or we may set percentage boundaries around each asset class and rebalance when they are exceeded. Either way, the underlying assumption is that our target allocation is better than the allocation the markets have given us.
Research on the value of rebalancing suggests that it has little ability to increase returns or decrease risk. Whatever utility exists depends on factors such as time period, the direction of the market and the relative future expected returns of the asset classes being rebalanced. Yet few, if any, of us take these factors into account in developing our rebalancing strategies. Instead, we employ simple, mechanical rebalancing strategies that add little or no value and may even detract from long-term performance.
The only thing we can be sure about is that our rebalancing strategies result in transaction and tax costs."
5i constantly encourages/recommends that we rebalance our holdings especially when one becomes more weighted than say approx. 5%.
I feel the writer has a very interesting POV and would like to ask you to let us know how you feel about his POV on rebalancing.
