frayne
Thinks s/he gets paid by the post
Jack Bogle, the founder of Vanguard and a pioneer of index investing, generally believed that rebalancing a portfolio should be done with simplicity and discipline in mind. While he acknowledged the importance of rebalancing to maintain an appropriate risk level, he also advised against overcomplicating the process or doing it too frequently. Here are a few key points about his perspective:
- Rebalance to Manage Risk, Not to Maximize Returns
Bogle emphasized that the purpose of rebalancing is to control risk and maintain the asset allocation that aligns with an investor's goals, not to chase higher returns. - Stick to a Plan
He advocated for a disciplined approach to rebalancing. This could mean rebalancing on a set schedule (e.g., annually) or when the portfolio's asset allocation drifts significantly (e.g., beyond a 5% threshold from the target allocation). - Avoid Overtrading
Bogle warned against frequent rebalancing, as it can lead to unnecessary transaction costs and tax consequences. He believed that simplicity and a long-term perspective were essential. - Consider Doing Nothing
Bogle often pointed out that, in many cases, a portfolio left alone would naturally self-correct over time, especially for long-term investors with diversified holdings. - Moderation is Key
He suggested a pragmatic approach: rebalancing less frequently and tolerating modest deviations from the target allocation to avoid excessive costs or complexity.