Article: The Strangest Investment Strategy Ever Created
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The Strangest Investment Strategy Ever Created
"Asset rebalancing" may be the strangest investment strategy ever created and unfortunately, this a strategy we are seeing more frequently in 401k plans, 403b annuities, as well as in section 457 deferred compensation plans that we advise on for our clients. Don't use it!
"Asset rebalancing" means setting your portfolio parameters?say you plan to have 15% each of your portfolio in certain areas?healthcare, 15% in technology, 15% in consumer goods, 15% in financial stocks like banks and insurance companies. Or you could have 20% in large cap stocks, 20% in small cap stocks, 20% international?you get the picture.
Now, according to the asset re-balancing program, every quarter, you re-examine these parameters. If, for example, the technology portion of your alloc...
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