Gyroscopic Investing

Up until now I have been putting new money in cash until rebalance bands are hit....however I feel like it would be better to simply take my contribution and divide it four ways and buy all four assets monthly. Had I done this I would have already hit a rebalance in stocks and I would have had more money in bonds and gold and thus caught more of their upswing over the last few months. Any data regarding these two strategies? The later seems like it would give me more opportunities to capture returns through rebalancing,

Your perception of the "best" re-balancing strategy is tainted by recent events as equities, gold and treasuries are all positive YTD.

As a taxable PP investor, I contribute to cash and then re-balance when a 35/15 tolerance band is breached to limit transaction costs and taxable events. Tax-deferred 401K investors without transaction fees have other options, including the ability to purchase assets in accordance with their current weightings (your example). This approach should benefit from momentum, but may suffer from reversion to the mean.

What I like to do is buy a different asset with every contribution on a rotating basis. That way I cut down on commission fees but don't let things get too far out of whack.

PS, are your contributions generally of about the same amount, and at regular intervals?  Seems like your strategy would work best when that was the case.

Xan wrote: PS, are your contributions generally of about the same amount, and at regular intervals?  Seems like your strategy would work best when that was the case.

Yes indeed. I find that this approach works well for 401k contributions especially, where the fixed bi-weekly nature of them means that each asset gets an equal amount of money sprinkled on it every two months. But I also do it with my taxable PP since I have my financial automation set up to automatically deposit money into that PP's brokerage account on a monthly basis.

Nice.  I wish I were anywhere close to that predictable...

I asked this question a few months back (best strategy for adding new money...) - I was considering adding just cash, adding it proportionally to compensate for "weak assets" (aka using new money to plus up weak assets - essentially rebalancing them) and adding it evenly split (25% each).

It turns out someone ran all of the scenarios and determined that adding new contributions using the 25%/each allocation is actually the best strategy to maximize your returns in the long term.  So now when I add new money monthly I just purchase new assets in each class evenly.  Of course there are some assets (like physical gold coins for example) where you may need to save enough money to purchase one every several months, depending on your savings rate and boating habits.

I'm with the others:  I put new money and dividends into cash until I'm ready to deploy the funds.  This cuts down on transactions and commissions and makes my life easier*.  It also forces me to pick the "best" (cheapest) asset when it's time to invest those funds. 

* My wife works for a registered investment advisory firm, and so due to SEC restrictions against insider trading I must obtain "permission" from them before I can buy or sell any ETFs, CEFs, or individual stocks and bonds.