1 / 9

Assumptions

Rebalancing – What works in Volatile Markets? December 3, 2009 Alan Bergin, CFA Larry Thompson & Associates. Assumptions. Portfolio with 60% in MSCI World and 40% in the Barclay’s Aggregate One portfolio is rebalanced annually Other portfolio is not rebalanced at all. Does Rebalancing work?.

orlando-navaez
Download Presentation

Assumptions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Rebalancing – What works in Volatile Markets?December 3, 2009 Alan Bergin, CFALarry Thompson & Associates

  2. Assumptions • Portfolio with 60% in MSCI World and 40% in the Barclay’s Aggregate • One portfolio is rebalanced annually • Other portfolio is not rebalanced at all

  3. Does Rebalancing work? • After almost 35 years, rebalanced portfolio worth more

  4. Cumulative Market Value Difference (Rebalanced minus non-rebalanced) • Rebalancing is not always the best solution

  5. Asset Allocation shifts in non-rebalanced portfolio

  6. What About 2007-2009 • Rebalanced portfolio worth more • It looked much worse through March

  7. Cumulative Market Value Difference (Rebalanced minus non-rebalanced) • If not for strong 2009 recovery, rebalanced portfolios would be far behind

  8. Asset Allocation shifts in non-rebalanced portfolio

  9. Conclusion • Rebalancing appears to work over long time periods • Over short periods, it has mixed results • In volatile markets, review asset allocation strategy before rebalancing • Issues to consider: • Have a rebalancing plan – do not market time • Rebalancing frequency • Range based or date based? • What is the cost of the rebalancing? • Range based rebalancing appears to offer best trade-off in costs and potential to capture market movements

More Related