Sunday, October 13, 2013

Rebalancing Opportunity Index

Now, along with the lines of the market timing to enter and exit a market, this ties in very closing with rebalancing as well.

As James Picerno and Mebane Faber both points out, rebalancing is important to make sure that you get don't overweight in any particular sector to ensure that you reduce exposure to something that might well be on it's way to a bust, but also ensuring that your portfolio is doing what it's supposed to be doing, which is to remain diversified.

I am very keen to take a page from James' idea of portfolio rebalancing, but I will have to look into a way to accurately, easily measure such opportunities and find out how it can translate to give me a rebalance signal.

The Monevator has an excellent article on rebalancing. He has tons more very layman, useful articles and I love his site. But anyway, it is value averaging, something that I am very much a fan of, instead of dollar cost averaging. DCA is much less scientific and can in a way, defy logic.

Now, perhaps I can find out a way that is simple, easy to generate values, logical and translatable to investment action with all the information I have been accumulating!

Equal weighting, rebalancing, minimum variance, momentum strategies.... I have my mind has a good workout tonight when I'm sleeping!

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