The real cost of a rebalancing strategy

Posted on by Milan Somborac
On August 2, 2018, from A. A. PhD., Columbia U. Professor Emeritus

Question:

How much does a rebalancing strategy take away from the APR (annual percentage return) from just keeping money in the S&P500 using a market index exchange-traded fund (ETF) such as SPY, VOO or IVV?

Monday Morning Millionaire Program Answer:

Rebalancing is a risk management technique and not a method of maximizing returns. Just keeping money in the S&P500 using a market index ETF will give investors the highest return but the cost is greatest portfolio value fluctuation. For an evidence-supported answer, it is useful to review the habits of highly effective investors.

  1. Having an early, disciplined savings program
  2. Self-directed (do-it-yourself) investing
  3. Buying the entire US market
  4. Buying and holding
  5. Buying low, selling high
  6. Avoiding complexity

Let us now look at a detailed answer.

YOU NEED TO LOGIN TO VIEW THE REST OF THE CONTENT OR LEAVE A COMMENT. Please Login. Not a Member? You can now sign up for $12 for a one-year membership. Join Us
Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

We have designed the Monday Morning Millionaire Program to offer abstracted investment education. The program does not provide any investment advice or endorsements.

The Monday Morning Millionaire Program has outperformed over 90% of professional managers over the last decade and more. You need to login to see our style. Not a Member? Join Us.