Diversification Sweet Spot

[LOL!]

I guess y'all read some recent research on when to rebalance:

http://www.fpanet.org/journal/articles/2006_Issues/jfp1106-art6.cfm

"Optimal Rebalancing Frequency ..."

"... deferring rebalancing to even as long as four years was superior to a monthly or quarterly rebalancing policy."

 

[samclem]

I guess y'all read some recent research on when to rebalance:

http://www.fpanet.org/journal/articles/2006_Issues/jfp1106-art6.cfm

"Optimal Rebalancing Frequency ..."

"... deferring rebalancing to even as long as four years was superior to a monthly or quarterly rebalancing policy."

Woo-hoo! My slothful procrastination pays off again!! It should be noted that in the quote above "superior" refers to overall returns. Volatility is almost surely the price paid for these increased returns. If you are willing to accept that, then less frequent rebalancing is likely a good policy.

The

 

[FinanceDude]

Well they have the empirical data to back it up.........

I used to feel that way BEFORE the run-up in tech stocks.

I now rebalance yearly for me, and pretty much always in December

The smartest thing I did (with no real reasoning) was to take 20% of my portfolio that was in growth and reallocate to bonds in December 1999..........

I rebalanced VERY LITTLE before the late 90's..........

 

[ESRBob]

Even though longer rebalancing periods to seem to pay off, the risk is that you won't rebalance at all, and you are back on the slippery slope to market timing. ("Gee, these things have had a big run, I think I'll rebalance now") is kind of an example of a halfway house to something worse...

If you stick to yearly rebalancing, the disckipine/good habit you'll be beveloping will probably pay off financially anyway compared to the non-data-mined real world behavior, and the peace of mind will be worth any small performance edge lost. (at least for reformed sinners market timers like me )