Rebalancing using trend following signals

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Always passive
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Joined: Fri Apr 14, 2017 4:25 am
Location: Israel

Rebalancing using trend following signals

Post by Always passive »

This article by Larry Swedroe (an admired advisor) on using trend following to rebalance caught my attention.
I extracted highlights..
"The second, and better, alternative was to use trend signals to determine when to rebalance during drawdowns. Using strategic rebalancing rules based on either the past stock or past stock-bond relative returns led to improvements of 2 to 3 percentage points. In addition, drawdowns tended to be less severe, with an average improvement ranging from 3.6 percent to 5.7 percent. They also noted: “In particular for 12-month trend, the average allocation to stocks and bonds is close to that of the 60% stocks and 40% bonds of the benchmark.”
and...
"The ability to keep your head while others are losing theirs is critical to being a successful investor. The historical evidence, backed by a large body of research demonstrating that time-series momentum, or trend, has provided a premium that has been persistent, pervasive and robust to various definitions, suggests that either adding an allocation to trend following or using trend signals to determine when to rebalance, will reduce risk without any reduction in returns."

If either strategy increases your ability to stay the course, they should be considered.

You can read the article here...
https://www.evidenceinvestor.com/a-stra ... balancing/
Does anyone use something similar? Do you care to explain?
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