Financial Company called me today

[CRLLS]

My Fidelity rep at one point asked me about rebalancing. I don't do it. He was for it as are most people as a rule. I was "show me the benefit". He ran some numbers on his computer using a hypothetical account, perhaps a 60/40. I honestly do not remember the details. He looked at rebalancing and letting things ride. To his surprise, not rebalancing outperformed very slightly with the detriment of higher volitivity. If not needing the money and having to pay trading fees to rebalance were the primary considerations, I would propose that not rebalancing would be the approach to take.

It only made sense to me. Why would you take money gained from equities out of that bucket only to put it into a lower earning bucket? Needing to make periodical withdrawals may make it a bit more difficult to deal with emotionally.

Of course, not everybody is comfortable with seeing that higher volitivity.

[street]

Quote:

Originally Posted by CRLLS My Fidelity rep at one point asked me about rebalancing. I don't do it. He was for it as are most people as a rule. I was "show me the benefit". He ran some numbers on his computer using a hypothetical account, perhaps a 60/40. I honestly do not remember the details. He looked at rebalancing and letting things ride. To his surprise, not rebalancing outperformed very slightly with the detriment of higher volitivity. If not needing the money and having to pay trading fees to rebalance were the primary considerations, I would propose that not rebalancing would be the approach to take. It only made sense to me. Why would you take money gained from equities out of that bucket only to put it into a lower earning bucket? Needing to make periodical withdrawals may make it a bit more difficult to deal with emotionally. Of course, not everybody is comfortable with seeing that higher volitivity.

That is the kicker for me in not to rebalance. I never have through out the 40 years I been engaged in the stock. Very good point!

[pb4uski]

Yup. Per Portfolio Visualizer. Jan 1987 to April 2018. 70 US Stock Market/30 Total US Bond Market.

With annual rebalancing:

Quote:

Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation Portfolio 1 $10,000 $173,464 9.23% 10.62% 30.50% -24.41% -36.08% 0.60 0.86 0.99

No rebalancing:

Quote:

Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation Portfolio 1 $10,000 $182,062 9.39% 12.06% 31.43% -30.17% -42.15% 0.55 0.79 1.00

As of April 2019, AA is 88/12.

[street]

pb4uski >> that is an excellent illustration and thanks again for all the sharing and facts you bring to the table.

It has always seemed if you sell and buy in rebalancing there would be some lose in bottom line. Again I would not have had any evidence to back that up but just thinking about it made me not rebalance through the years. I have done so much wrong and unorthodox ways I'm surprised at times I'm where I'm at financially.

Thanks

[Sunset]

It's not the rebalancing that is the problem , it is that rebalancing keeps a level bond percentage.

So the portfolio with a higher stock percentage, wins in terms of total return.

This is because 100% stocks outperform all other allocations over a long period of time. (please prove me wrong as I'm 90% stocks).