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What ‘Back to the Future’ Can Teach Us About Portfolio Rebalancing

By Advisor Perspectives
Financial Services

The standard 60/40 portfolio featuring a basic mix of US and international equities plus aggregate bonds has returned a cumulative 754% since 1990. Or has it returned 781%? Or maybe 730%?

All three numbers are correct for this standard strategic asset allocation mix. The differences, however, like the devil, are in the details: it depends on when the portfolio was rebalanced.

Think about portfolio rebalancing like Marty McFly purchasing the Grays Sports Almanac when he and Doc Brown traveled to the year 2015, only to have it found by the 2015-version of Biff Tanner after Doc Brown haphazardly threw it out. This led the 2015 Biff to travel back to 1955 to give it to his younger self so he could get rich by betting on sporting events. In essence, this one singular action triggered a chain reaction of events, thereby creating a distorted time paradox and an alternate timeline for everyone involved.

Read more at Advisor Perspectives.

Photo: MsSaraKelly

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