https://personal.vanguard.com/us/insights/article/rebalance-05032011
During significant market declines—like the 37% decline in U.S. equity markets that we experienced in 2008*—investors often question the wisdom of rebalancing. It seems counterintuitive, especially during volatile periods, to sell your best-performing assets and invest more in those doing worse. Yet this is precisely the time to consider rebalancing—when your portfolio has likely veered from your target allocation.
Periodically rebalancing your portfolio is an important part of maintaining the target allocation that's consistent with your goals and risk/reward preferences. What may appear less certain is when and how you should rebalance.
A recent Vanguard research paper concluded that the frequency of rebalancing does not significantly affect a portfolio's overall returns. But that's okay: Remember that the goal of rebalancing isn't to maximize returns; instead, it's about keeping your exposure to risk at a level comfortable for you.
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Zim.
Mad Poet Strikes Again.
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