At first, after we build a good fund portfolio, all kinds of assets have a certain proportion, but the market is dynamic and the fund target is also dynamic. With the change of the market, the investment strategy and position of the target fund will change, and the proportion of various assets will deviate from the original proportion and become unsuitable for our own risk preference.
Therefore, after the completion of the fund portfolio construction, it is necessary to continue to follow up and rebalance the fund portfolio.
Rebalancing strategy refers to determining the asset ratio of stocks and bonds, and after a period of time, restoring the ratio of stocks and bonds to the initial state.
Theoretical logic of rebalancing strategy
There is no significant correlation between stocks and bonds, but there are significant fluctuations. In a certain period of time, compared with bond assets, stocks fluctuate violently. Although bonds are short-term fluctuations, they show the characteristics of fixed income because they can repay the principal and interest. In the long run, bond assets as a whole are a curve with low slope.
With the rise of stock price in the short and medium term, the proportion of stocks and bonds in the portfolio will be broken, with significant equity and low bond weight. At this time, the rebalancing strategy is implemented, selling some stocks that have risen and buying some bonds that have not risen much. This is equivalent to locking in the rising income of some stocks and reducing the risk of the portfolio.
On the other hand, if there is no big change in the fundamentals of the enterprise, the stock price will fall in the short to medium term, which means that the stock will become cheaper and the potential rate of return will rise. At this time, the bond rights are significant and the stock weight is low. At this time, sell some bonds and buy some stock assets that have fallen sharply. It is equivalent to bargain hunting when stocks are cheap.
Through this operation, the portfolio can reduce the fluctuation, always keep the balance between risk and return, and it is easier to cross the cycle.
Key points of rebalancing strategy
Determine the initial proportion of stock and debt investment: different investors have different risk preferences, and the initial proportion of stock and debt investment is not the same. From the perspective of long-term investment return and the effectiveness of the strategy, stock 3, debt 7, stock 5 and debt 5 are commonly used allocation ratios.
Set the adjustment threshold of rebalancing: the adjustment threshold of rebalancing means that when the deviation of the stock-debt ratio reaches this value, the stock-debt assets will return to the original set ratio. According to the volatility of A shares, it is reasonable to set the threshold of debt assets at 5%- 10%.
Strict investment discipline and regular implementation: some investors will be fascinated by the rising market conditions and think that rebalancing at this time will reduce investment income; On the other hand, I am afraid when I fall down continuously, and feel that rebalancing at this time will bear the pain of falling in vain. Without investment discipline, rebalancing strategy has no practical significance.
Advantages and disadvantages of rebalancing strategy
Balanced strategy can reap floating profits when it rises, lock in profits when it falls, and buy cheap assets. Investors only need to pay attention to the deviation of stock and debt assets and make corresponding asset adjustments according to the trigger of the threshold. They don't need to pay too much attention to the market, and they don't need to make subjective judgments on the market, which is simple and easy to do.
However, the rebalancing strategy of stock and debt means that investors give up some market timing, thus giving up timing income. If the market fluctuates or the trend market exceeds expectations, and stocks continue to sell stocks and buy bonds, the yield will be worse than the buy-and-hold strategy.
In addition, it takes a long time to verify the rebalancing strategy.
I hope the above contents are helpful to you.