John Bogle Doesn’t Rebalance His Portfolio

When John Bogle ran his regular “Ask Jack” column, he addressed a reader question about portfolio rebalancing and mentioned that he didn’t engage in the practice himself, and offered this data to readers:

Hi, Mr. M,

Sorry it’s taken me so long to respond to your thoughtful note.  Busy!

We’ve just done a study for the NYTimes on rebalancing, so the subject is fresh in my mind.  Fact: a 48%S&P 500, 16% small cap, 16% international, and 20% bond index, over the past 20 years, earned a 9.49% annual return without rebalancing and a 9.71% return if rebalanced annually.  That’s worth describing as “noise,” and suggests that formulaic rebalancing with precision is not necessary.

We also did an earlier study of all 25-year periods beginning in 1826 (!), using a 50/50 US stock/bond portfolio, and found that annual rebalancing won in 52% of the 179 periods.  Also, it seems

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