This is not applicable for me at the moment. Until yields normalize to a more reasonable value, I will not be even thinking about thinking about holding bonds in any capacity. When that day does arrive, I will be thinking about asset allocation ETFs like _GRO, _BAL...Deepwater wrote: ↑ Your ability to rebalance depends on your temperament and commitment to maintaining a balanced portfolio, and understanding why you made your choice. A written Investment Policy Statement can assist in maintaining your resolve. Understanding investing history, how different geographies, asset classes and management styles underperform or outperform over time (sometimes for extended periods) leads to an understanding of the reasons for diversification. Authors like William Bernstein, Charley Ellis, Rick Ferri and Paul Merriman have written extensively on the subject.
One tactic is to not rebalance into risky assets. If your equities get above your target, then your portfolio risk and volatility will increase and you should rebalance. If there is an equity crash, if you just hold your existing assets, equities have always recovered. Rebalancing will bring you back to your target allocation faster, but not everyone chooses to do it,
In his book All About Asset Allocation, Rick Ferri wrote about an elderly client whose answers on a risk tolerance questionnaire indicated a high tolerance for risk and volatility. Rick did not think that was appropriate, so he reframed the issue from percent loss, to dollar value loss in a deep equity bear market. That made the issue more tangible and the client recognized their ability to handle volatility was not as high as they originally thought. You never know how you will respond to a crash until you experience one.
I use +/- 5% as my rebalancing threshold. In the past 10 years I have never reached that threshold, not even in March 2020.
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