Posts Tagged ‘rebalancing’
In the arena of academic finance, the debate over whether a rebalancing “bonus” exists or not has become somewhat of a religion!
Those who are ardent believers of an efficient market such as Nobel Prize winner Eugene Fama usually believe all returns should be the result of taking risk and that simple actions like rebalancing periodically should not produce additional returns.
Those who believe the market is emotion-driven, such as Nobel Prize winner Robert Shiller, believe in a rebalancing “bonus”. Since the market is either over-priced or under-priced from time to time, rebalancing allows us to take advantage of this market mispricing.
The return differential of RSP vs SPY provides an excellent control experiment to test whether this illustrious rebalancing “bonus” actually exists. SPY and RSP invest in the same 500 largest stocks of the US. SPY being a cap-weighted fund, does not require rebalancing, while RSP being a equally weighted fund requires periodic rebalancing.
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Here is a selection of the best wealth management articles around the web for September:
5 reasons your portfolio is too complicated, by Kyle Bumpus
Why analysts are scratching their heads over QE3, by Robert Wasilewski
Under the radar bill could benefit fiduciary rule making, by FI360
Is rebalancing market timing?, by Mike Piper
Choosing a mutual fund – Avoid these 6 mistakes, by Roger Wohlner
Fidelity’s new retirement saving guidelines, by Barbara Friedberg
Can I consistently outperform the market? by Ken Faulkenberry
Dividend reinvestment plans (RIPS) and their benefits, by Dave Scott
Questions to ask when picking a financial advisor, by Carl Richards
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