Does Portfolio Rebalancing Help Investors Avoid Common Mistakes?

May 2005
Journal of Financial Planning;May2006, Vol. 18 Issue 5, p56
Academic Journal
The article discusses the necessity of portfolio rebalancing to mitigate the harmful impact of improper investing decisions. Several behavioral issues that cause poor investments are examined, including herd mentality, regret aversion, and mental accounting, which often result in performance chasing. Evidence of the benefits of portfolio rebalancing is illustrated through a comparison of a chase portfolio with a series of annually rebalanced portfolios using different allocations, including large company stocks and Treasury bills.


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