Rebalancing tends to add value in the long-term

The intraday high for the SPX on January 26th was 2872 and some change. On February 9th, the index had an intraday low of around 2532. Since then, the widely followed index has traded in between these two numbers.

Top-to-bottom is around 340 S&P points. Selling the top and buying the bottom would net you almost 12%. Most refer to it as a range bound market. Increased volatility has often been a precursor to a trend change… and some things never change.

Some investors, because of increased volatility, will choose to remain on the sidelines and wait. But what are they waiting for? A breakout to a new high? A new low? Foolish indeed. There are ample returns to be made while a new direction for the market is established. Therein lies the beauty of an asset allocation strategy with a disciplined rebalancing approach, one that performs best during range bound markets. Never buying high or selling low allows our strategy to capture both extremes.

Any disciplined approach to rebalancing tends to add value over a long-term horizon by enhancing portfolio returns and/or reducing portfolio risk. Rebalancing to an investor’s strategic asset allocation has benefits and costs, but any divergence from the investor’s policy allocation represents a utility loss for the investor. Re-balancing is a risk-control discipline that helps ensure an appropriate level of portfolio risk. Our predetermined policies are designed to be a standard for our client’s combination of objectives and risk tolerance. Available asset classes serve as a beacon toward which we strive.

LaSalle St. Investment Advisors, LLC
940 N. Industrial Dr.
Elmhurst, IL 60126