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<p>[QUOTE=&quot;medoraman, post: 1150133, member: 26302&quot;]I will relate a study that was done for 100 years of US investments I used to make my MBA students read and give a report on. Everyone always gushes about the advantages of portfolio rebalancing. </p><p><br /></p><p>The study was of 1900-2000 equity and bond markets. There were four calculations done:</p><p><br /></p><p>1. Start with equal amounts of debt and equity, and let them ride.</p><p>2. Same, but rebalance to 50-50 at the end of each year.</p><p>3. Same, but only sell stocks to get to 50-50, let bonds ride.</p><p>4. Same, but only sell bonds to get to 50-50, let stocks ride.</p><p><br /></p><p>So which method do you think earned the greatest return?</p><p><br /></p><p>Number 4, selling bonds when they were greater than 50% of your portfolio, but not selling stocks. Fixed assets have a static return, therefor they are defensive plays and help buffer your total portfolio versus lows. However, your growth assets, stocks, you are penalized by selling when they take off, not letting them compound like they will do.</p><p><br /></p><p>Why do I relate this? Because to me PM&#039;s are much more like bonds than stocks, and Ripley&#039;s idea is really a great one. If someone is disproportionately in &quot;safe&quot; static investments, they are minimizing future returns. To me the REASON to own bonds and PM&#039;s is the protection, not the growth. I know they have gone up quite a bit recently, but that is not a reason to assume they will continue this trajectory.</p><p><br /></p><p>None of this is taking people&#039;s individual situations into account, and if you are near retirement and need to make sure of the cash, you answer can vary. This is a purely theoretical exercise.</p><p><br /></p><p>Just my thoughts.[/QUOTE]</p><p><br /></p>

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