Fancy a free lunch?

They say that asset allocation and rebalancing is the closest that you can get to a free lunch in the world of finance. With my SIPP I have a look at the different asset classes that I use, every six months, or after a major market move, and decide whether I need to ‘rebalance’ things. The idea is that by selling some of whatever asset class has done best, and buying whatever has done least well, I am forced to ‘sell high’ and ‘buy low’, something that most of us investors struggle to do. This strategy is based on the work by Harry Browne, with modifications to suit me. This portfolio is up 21% over the past 4 months - amazing, I think!

The five asset classes that I use are:

  1. developed nations equities

  2. emerging markets equities

  3. property

  4. gold/commodities

  5. bonds.


Step one: have a look and see what has done best over the past six months. Answer (today): emerging markets, followed by gold/commodities.

Step two: if the allocations are significantly out of line, sell some of the best performing assets (if there is not enough cash in the account from dividends) and buy some of the least well performing assets in order to bring the five different classes back to parity.

Step three:do nothing for a further six months!

So, this week I sold some of my emerging markets funds and bought more property and bond funds. Members of my trading club will know exactly what I bought and sold, and the details of this strategy. I have just had my free lunch, apparently!

By the way, the above strategy, that I use for my SIPP is not a trend-following strategy! This strategy is an ‘always-invested’ strategy that avoids market timing. As you may know, however, I am a trend-follower too. If you are interested in my thoughts on some different asset classes and my weekly trend-following strategy this week, then have a look at this video.

My trading club is run via a private Facebook page. I hope that I will have the manuals of my different strategies produced and available to club members by January 2017. Meanwhile, if you are interested in joining the Facebook page (for free) while things are in the development stages, just get in touch!

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