I'm in my peak earning years now and I'm trying to catch up for my misspent youth. Due to my work, bonuses and such I have a good chunk to deposit in my IRA and taxable portfolio near the end of the year.
So I'm wondering which approach would provide the best long term returns - dump 25% of my contribution in each category blindly, or is it best to use this opportunity to top each investment category up to a 25% total overall (i.e. use my additions to effectively rebalance back to 25% overall for each)?
Has anyone run a backtest to find our if one strategy would be better than the other if regular contributions are made?
Rebalance when Adding Funds or Not?
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- mortalpawn
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Re: Rebalance when Adding Funds or Not?
Sophie did a backtest that suggested a straight 25x4 deposit was advantageous. But I'm skeptical that conditions that make it so (momentum, essentially) will continue to play out vs. the additional rebalancing costs