[rokkamokka]

Rebalancing is just selling the high performers and buying the low performers. In his example, you'd keep your "safe asset" allocation at say 15% - if your other stocks did well one year, you'd sell some and buy more "safe assets" so they again constitute 15% of your total value. If stocks tanked, you'd instead sell some "safe assets" and buy more stocks, again until your "safe assets" are back at 15% of total value.

[WalterBright]

> Rebalancing is just selling the high performers and buying the low performers.

Guaranteeing mediocre performance. Not my cup a tea.

[kqr]

Not at all -- it uses volatility in one's favour, by cashing out on temporary peaks and buying in on temporary lows.

What you describe sounds like a kind of momentum/market cap investing, which is favourable in the short term, but suffers a lot when things go bad.

(This is assuming one cannot predict future returns better than the rest of the market. If you do that all the better!)

Seems like there's a lot of confusion on this. I'll see if I can get a fuller article up.

[ozim]

Mediocre performance is better than your top performers dropping 30% or 60%.

I can point couple companies that suddenly dropped from $90 a share to below $10 and then they never got up “Just eat takeaway.com” between 2018 and 2022 it was looking like they would go to the moon. In 2022 you can see hell of a drop and it is not going back.

If you would sell parts of it before 2022 you would lock at least some of the gains.

But I think you know better when to switch companies ;)

[WalterBright]

Oh, I've had my portfolio drop 90% once. And drop 50% at other times, and 30% drops.

It's not easy to suppress the panic.