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04 Pillars

chap 14&15

don't try to run a marathon when you first start investing
rebalancing sell and buy to bring things back into balance
dollar cost averaging (DCA) investing the same amount of money regularly in a given stock fund. if the fund fluctuates in it's price during the year, you will get the lower avg price.
disadvantages of DCA you could buy during a bull market at high prices and then experience a bare market
value averaging you aim at having a specific amount in the account every month. 100 first month, 200 second month, etc, 1200 month 12, in this case if the fund declines more than the 100 will be needed or if it increases less will be needed
gardening keeping you portfolio in the bounds that you want it and maintaining risk. This will give you higher returns and mental toughnest, keeps portfolio with in risk
3rd benefit to rebalancing psychological conditioning, you must buy low and sell high, this is hard to do when the asset has been falling, Rebal forces you to buy low and sell high,
bucking financial wisdom is challenging, this is your financial condition, this will show how strong your emotions are when it comes to investing.
staying in shape like physical training, rebalancing is a superb way of staying in financial shape
contrarian somone who does the opposite of what everyone else is doing. Rebalancing makes you do this. Financial contrarians tend to be wealthier than everybody else.
When it comes to investing in asset classes the small investor has the advantage for 2 reasons: 1. sudden market downturns affect small investors less 2. They have only their own gut reactions to worry about. Institutional manager has to worry about the emotions of clients, it may be hard to convince your clients that rebalancing is good.
how often should you rebalance every 2 - 5 years? This is sensitive to what assets you use. If markets are efficient then you will not make any money rebal. so every few years or so.
Created by: delorya