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Rebalancing and Withdrawal Strategies
Old 01-01-2016, 11:15 AM   #1
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Rebalancing and Withdrawal Strategies

This week's Oblivious Investor has at least two great articles.

First, Michael Kitces on Portfolio Rebalancing

The takeaway: Rebalancing lowers the overall return because it is a risk mitigation strategy, but offers rebalancing bonus opportunities


Darrow Kirkpatrick, Best Retirement Withdrawal Strategies
New Research: The Best Retirement Withdrawal Strategies - Can I Retire Yet?

In a nutshell: evaluates 6 withdrawal strategies.

I'm still digesting, but am interested in your comments.


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Old 01-01-2016, 04:22 PM   #2
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The Kirkpatrick thing is being discussed: Evaluating various withdrawal strategies

I cannot tell what's going on in it because it is poorly written, so any conclusions are dubious to me. I can write that the method that produced the best results suffered from the thing that Kitces was writing about.

Also, any study that only does rebalancing on an annual date is worthless to me. There are better ways to pick the dates to rebalance than 12/31 or your birthday each year.

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Old 01-01-2016, 04:27 PM   #3
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I already initiated the transaction requests to rebalance my portfolio for 2016. Taking some poker chips off the table .
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Old 01-01-2016, 06:28 PM   #4
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Rebalancing stocks/bonds is risk mitigation. Rebalancing stocks/stocks, or any assets that have equal expected future gains should actually increase your gains over the years. It was about 1%/year when optimized if I remember the old studies. That's the buy low, sell high effect of rebalancing.
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Old 01-02-2016, 10:13 AM   #5
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A better Kitces comparison to the Kirkpatrick blog is here:

Take a look at the last figure in Kitces. In retirement, equal withdrawals (without re-balancing) run down the portfolio while withdrawals with re-balancing do not. Kitces does this for just one starting year (1966), while Kirkpatrick runs some simulations, but I would favor re-balancing based on this.
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