Great. Now try it on the opposite direction.KlangFool wrote: ↑Sat Jun 25, 2022 8:48 pmAA = 60/40, Portfolio = 100K, 60K stock and 40K bond.smitcat wrote: ↑Sat Jun 25, 2022 6:53 pmPlease tell us what happens by....KlangFool wrote: ↑Sat Jun 25, 2022 6:36 pmPlease do not confuse a back test as a mathematical fact.
What happened to rebalancing bonus if the stock market is oscillating and going side way or down for the next 10 years?
KlangFool
Please provide a model similar to the ones above with the market going 'sideways' for an extended period of time demonstrating the advantage/disadvantage to the rebalancing.
The stock market drops 30% and then went up by 30% -> Side way . The bond did nothing.
A) No rebalancing.
60K * 0.7 * 1.3 = 54.6K + 40K = 94.6K
B) With rebalancing
60K stock drop to 42K stock (60K * 0.7)
Rebalance to
49.2K stock and 32.8K bond
Stock goes up 30 % -> 49.2K * 1.3 = 63.96K
Bond = 32.8K
Total = 96.76K
KlangFool
Also: as long as we are backtesting, include the period before the market went down.