Investors should consider rebalancing their portfolios, including SMSF trustees who must comply with an investment strategy. Regular rebalancing can reduce concentration risk and improve performance.
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Investors should set a preferred asset allocation based on risk tolerance, but sticking to it through tough market conditions is a challenge. Yet most of an investor’s return comes from asset class allocation.
Index and asset allocation specialists, Research Affiliates, have tested a theory they call the ‘Rip van Winkle’ approach. It uses a cap-weighted index portfolio drawing the data from 20 years earlier to prove a point.