Discipline, Temptation, and Asset Allocation

[Maurice]

Interesting article, HFWR, thanks for posting it.

This factoid is worth remembering:

[FONT=Helvetica,Arial][FONT=Helvetica,Arial]Twice in the last century, 1900-1999, the S & P 500 lost approximately 65% of its value, adjusted for inflation and/or deflation, and took 15 years to produce a mere breakeven in returns. [/FONT][/FONT]

 

[audreyh1]

Truman Clark, of DFA, examined the issue of rebalancing in detail in three papers published online in Fall of 2001. He concluded that, "the proposition that a rebalancing strategy can increase expected return is dubious," and that "rebalancing costs definitely reduce expected returns."

Many of us use AA as a method for reducing volatility, and/or a technique for increasing the risk-adjusted return. It's not a method for maximizing return.

Audrey

 

[walkinwood]

HFWR, thank you. great link.
Here's the link to the Truman Clark document - worth reading though it is a bit long.
http://www.dbpaustin.com/pwm/TrumanClarkRebalancing.pdf

Truman discusses the real world implications of rebalancing - something that the research papers do not take into account and are, for the most part, specific to each individual's situation.

Audreyh1 - he talks about what you mention too & considers it a sound reason for AA.

I found the paper worth reading - now to figure out how to put it into practice!