tms wrote:How can Bogle be in favor of the "100-age rule", and be against "rebalancing".
I like to think that Mr. Bogle might be a rough-n-ready satisficer.
I'm not sure what the definition of "rebalancing" is.
As used in this forum, it refers to a fairly structured discipline, such as balancing on a schedule, with 6 months, 1 year, and 2 years being intervals that are frequently suggested; or, by a rule such as Larry Swedroe's: "I like to take a 5/25 approach. That means if an asset class has moved an absolute 5% or a relative 25%, you should probably rebalance." Anyone know how frequently that typically is? I imagine it's around once a year.
Rebalancing seems to mean tweaking about once a year and keeping your asset allocations rather tightly on track.
But what do we call it if you only reset your asset allocation every decade or two--say, at significant life events like retiring?
The assumption that you should be constantly making minute adjustments, that a 55-year-old needs a different asset allocation from a 50-year-old, is something new. And, of course, patently bogus. Every mutual fund company's target-date funds imply that it's really important for a 55-year-old to have a shade more conservative allocation than a 50-year old, yet they differ wildly
in what a 55-year-old's allocation should be. And in Vanguard's case, has changed course by as much as 15% during the rather short period of time--less than a decade--they've been in existence. If Vanguard doesn't know the right number to within 15%, then it can't be important to do 1% annual tuning adjustments.
In Ye Olde Days, say ten years ago, the various advice books and such illustrations didn't draw minute distinctions in asset allocation. You could live your whole life happily with just four or so different pie charts.
I think Burton Malkiel's "A Random Walk Down Wall Street" has four different model portfolios for different age ranges.
The old Vanguard LifeStrategy mutual funds have a name mplies that they are related to lifecycle investing. They don't self-adjust like target retirement, and they aren't named in terms of ages or years, but the working assumption is that you shift from one to another over time. And there are only four.
Growth, Moderate Growth, Conservative Growth, and Income. Four sizes fit all ages.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.