The most perplexing thing I read this week was an odd column by Paul Merriman at MarkeWatch, "Why Rebalancing Could Be a Huge Mistake." He makes the counterintuitive claim that portfolio rebalancing doesn’t really work: “Conventional wisdom holds that regular rebalancing is a sound practice to control investing risk. But I’ve concluded that some of that conventional wisdom is wrong.”

I dismissed Merriman’s claim offhand because what he described was not true asset class rebalancing. He was looking within the same asset class -- U.S. equities -- and subdividing them into four market cap weighted, style-based subgroups: Large-cap, small-cap, large-cap value and small-cap value stocks.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access