More frequent rebalancing?

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    In light of the hugely volatile past 2 months, wouldn’t it make sense to re-balance and re-pick the strategies more often? Someone that make sense at the beginning of the month can be totally the opposite near the end!


    The problem with more frequent rebalancing is that it creates whipsaw effects, and additional transaction costs. Our strategies are long-term, which means they “sit-out” such corrections with the appropriate mix of risky assets and hedges, and not try to do short term market timing.

    The monthly rebalance cycle in basically all our research shows to be superior due to two effects, a) still a mild “end-of-month” effect in prices due to institutional rebalanancing, but more important b) a “psychological” effect of creating a habit at the human end, that is, to avoid sitting at the monitor all month, and by routine rebalance once a month – that helps sticking to the plan, especially in times like we currently experience.

    Give it a try downloading QuantTrader:, and then change the rebalance period from monthly to weekly, bi-weekly – and in contrast quarterly.

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