Rebalancing metrics from "summary" of Investment Performance Attribution by David Spaulding
Analyzing the performance of a portfolio is an important aspect of investing. Rebalancing metrics provide an effective way to measure the success of a portfolio and ensure that it remains aligned with its original investment objectives.- Analyzing the performance of your portfolio on an ongoing basis is key to ensuring effective rebalancing is taking place.
- Monitoring metrics such as turnover, wastage, and alpha are some of the common methods used to evaluate whether rebalancing is necessary.
- The key advantages of rebalancing include selling high and buying low, avoiding market timing errors, gaining diversification benefits, and staying disciplined.
- Rebalancing is a process of readjusting account to its original target weights. It's typically done when there has been significant movement within assets or markets.
- Maintaining the correct balance between different asset classes can help you reach long-term investment goals.
- To maintain an optimum mix, investors should periodically adjust their allocation of investments in accordance with predetermined criteria.
- Knowing when and how to rebalance is critical for sound financial planning.
