Is a perpetually balanced portfolio feasible?

[investormcgee]

This idea is used constantly in today's investment world. Investment advisors sell this idea to clients as the only way to go when investing. With constant re-balancing it gives you a decreased amount of risk and typically a more stable (sometimes better) return.

[DcifrThs]

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This idea is used constantly in today's investment world. Investment advisors sell this idea to clients as the only way to go when investing. With constant re-balancing it gives you a decreased amount of risk and typically a more stable (sometimes better) return.

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the real world deals with taxes though and transaction costs. studies have examined rebalancing with and without these considerations. monthly rebalancing is sufficient to earn the additions to a passive portfolio's sharpe ratio while minimizing the costs associated with it.

this is similar to hedging considerations of an int'l equity portfolio. while in a vacuum, 100% hedge is optimal, when transaction costs are taken into account a 50% hedge becomes closest to optimal.

Barron