Rebalancing Bonus at Year 30 Graph

Here is a graph of the Rebalancing Bonus at Year 30. It can cost you a lot.





The portfolios start with $10000. They have 50% stocks (S&P500) and 50% TIPS at a 2% (real) interest rate. I included no charges for expenses. I looked at 30 year sequences beginning in 1923-1970.

One portfolio allocation is held fixed via annual rebalancing. The other is allowed to vary.

I subtracted the balance without rebalancing from the balance with rebalancing. This shows the bonus in dollars. Rebalancing can save you a little or cost you a lot.

Have fun.

John Walter Russell
October 3, 2008