Simple Rebalancing Rules Are Best

Rebalancing is effective, the article argues, because it “works against the boom-bust cycle.” Different weightings will result in different returns, but that’s not really the point. What’s important is sticking to your plan, it says, which is easiest done by keeping things simple. Ang compares the discipline of rebalancing to physical exercise: “It doesn’t really matter whether you are swimming, playing tennis or running,” he says. “What’s really important is getting into the habit of making a regular time to exercise.”

The article concludes, “If a rebalancing habit is established in calm markets, it will be much easier to follow when markets become stormy.”

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