logo
  Join        Login             Stock Quote

The Rise Of Robo Rebalancing

 March 27, 2012 09:56 AM


Tara Siegel Bernard tells us that automatic rebalancing options are becoming common at 401(k) plans, but the service is still a rarity for online brokerages. TD Ameritrade and Fidelity are among the handful of exceptions, she reports in The New York Times. In a perfect world, these options would be standard everywhere. Rebalancing, after all, is crucial for risk management and earning a decent risk premium through time. Making this essential task easier, by putting it on auto pilot, would be a huge plus for investors.

You can, of course, rebalance on your own. The problem is that most of us don't, at least not on a timely basis, perhaps not at all. The price of inaction can be costly because the rebalancing bonus can be substantial. For example, my research shows that a simple regimen of rebalancing a portfolio comprised of the major asset classes improves performance considerably vs. an unrebalanced strategy over the past decade-plus. Optimizing the process holds out the promise of doing even better.

[Related -Chart Says This Retailer's Comeback Isn't Finished]

That's old news, of course. Numerous studies over the years find that rebalancing is the foundation for successful portfolio design and management. A few examples:

[Related -ETF Performance Review: Major Asset Classes | 19 Dec 2014]

"Portfolio Rebalancing in Theory and Practice," by Yesim Tokat (Vanguard)

"Active Portfolio Rebalancing: A Disciplined Approach to Keeping Clients on Track," by John Nersesian (IMCA)

"The Importance of Portfolio Rebalancing in Volatile Markets," by Steven Weinstein, et al. (CCH Inc.)

"The Subtle Art of Rebalancing," by Bill Montague (Consulting Group)

Although the topic of rebalancing is no stranger to financial analysis, it's premature to say that the subject has been exhausted as a research topic. Identifying the ideal set of parameters that govern the rebalancing rules is certainly in no danger of full transparency, as a new paper from Research Affiliates reminds.


Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageChart Says This Retailer's Comeback Isn't Finished

One of the surprises, at least on the surface, of the market's recent swoon was the outperformance of read on...

article imageETF Performance Review: Major Asset Classes | 19 Dec 2014

It’s all about real estate investment trusts (REITs) these days when it comes to bullish performance among read on...

article imageOil and Global Stock Markets Rebounding Sharply

So far so good on our expectation of a 4 to 5% pullback and then a resumption of the bull read on...

article imageGrading the FOMC

Love its members or loathe them, you have to admire the gradual impact the policy-making committee has had read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.