Comments on: Will I Get a Rebalancing Bonus in my Portfolio?

By: calcinv

calcinv — Wed, 23 Mar 2011 00:58:10 +0000

Yes, Japan is a great example, and I like the “not a lay-up” metaphor. Rebalancing has often increased returns in the past, and I hope it increases returns in the future as well…but I do think that investors should be aware that the necessary conditions for increased returns are a bit fragile.

Jack Bogle has some interesting comments along these lines on his website in his response to “Mr. M”: http://johncbogle.com/wordpress/2007/06/15/john-bogle-responds-to-ask-jack-questions-2/

By: DIY Investor

DIY Investor — Tue, 22 Mar 2011 11:28:49 +0000

I agree that rebalancing is not the layup that many people see it as. Investors like to think in terms of reversion to the mean which gets you to automatically sell the pricier asset and buy the cheaper asset. When that is brought up I mention the case of Japan. The cheaper asset can continue to get cheaper for a long time.
The point about transactions costs is important. The bottom line is to me is that rebalancing can add value but it is not a no-brainer. There is still a bit of analysis that needs to be done.