Stocks/Bonds 60/40 Portfolio: Rebalancing Strategy

Data Source: from January 1871 to May 2023
Consolidated Returns as of 31 May 2023

Managing the Stocks/Bonds 60/40 Portfolio with a yearly rebalancing, you would have obtained a 7.93% compound annual return in the last 30 Years.

With a quarterly rebalancing, over the same period, the return would have been 7.92%.

How do returns and drawdowns change, implementing different rebalancing strategies?

Rebalancing Strategies

In order to keep risk under control, you should rebalance assets quotes from time to time, so to keep them at the original percentage of the asset allocation.

Rebalancing can be performed in several ways.

At fixed time intervals:
  • Yearly: Jan 1st
  • Half Yearly: Jan 1st, Jul 1st
  • Quarterly: Jan 1st, Apr 1st, Jul 1st, Oct 1st
When a component (at least one) diverges from its original weight beyond a certain threshold (e.g. 5% or 10%).

Portfolio Returns as of May 31, 2023

Implementing different rebalancing strategies, the Stocks/Bonds 60/40 Portfolio guaranteed the following returns.

According to the available data source, let's assume we built the portfolio on January 1871.

Portfolio returns are calculated in USD, assuming:
  • No fees or capital gain taxes
  • the reinvestment of dividends, if existing
STOCKS/BONDS 60/40 PORTFOLIO RETURNS
Period: January 1871 - May 2023
Swipe left to see all data
 
Return (%) and number of rebalances as of May 31, 2023
Rebalancing Strategy 1Y 5Y(*) 10Y(*) 30Y(*) (**)Since
Inception
Yearly Rebalancing 0.36 (1) 6.52 (5) 7.55 (10) 7.93 (30) 7.62 (153)
Half Yearly Rebalancing 0.54 (2) 6.58 (10) 7.51 (20) 7.82 (60) 7.63 (305)
Quarterly Rebalancing 0.52 (4) 6.76 (20) 7.59 (40) 7.92 (120) 7.65 (610)
5% Tolerance per asset 0.46 (0) 6.44 (1) 7.54 (4) 7.94 (19) 7.63 (89)
10% Tolerance per asset 0.56 (0) 6.72 (1) 7.81 (2) 8.10 (7) 7.71 (29)
(*) Returns over 1 year are annualized
(**) Since Jan 1871 (~152 yrs) | Annualized Returns

In order to have complete information about the portfolio, please refer to the Stocks/Bonds 60/40 Portfolio: ETF allocation and returns page.

Performances as of May 31, 2023

Historical returns and stats of Stocks/Bonds 60/40 Portfolio, after implementing different rebalancing strategies.

STOCKS/BONDS 60/40 PORTFOLIO PERFORMANCES
Period: January 1871 - May 2023
Swipe left to see all data
Standard Deviation
Max Drawdown (%)
Rebalancing Strategy (*)Return (%) StDev(%) Ret/StDev MaxDD(%) Ret/MaxDD
Yearly Rebalancing 7.62 (153) 10.20 0.75 -62.03 0.12
Half Yearly Rebalancing 7.63 (305) 10.33 0.74 -61.92 0.12
Quarterly Rebalancing 7.65 (610) 10.38 0.74 -62.39 0.12
5% Tolerance per asset 7.63 (89) 10.40 0.73 -63.77 0.12
10% Tolerance per asset 7.71 (29) 10.55 0.73 -63.33 0.12
(*) Since Jan 1871 (~152 yrs) | Annualized Returns (and number of rebalances)

Drawdowns as of May 31, 2023

Historical Drawdowns of Stocks/Bonds 60/40 Portfolio, after implementing different rebalancing strategies.

STOCKS/BONDS 60/40 PORTFOLIO DRAWDOWNS
Period: January 1871 - May 2023
Swipe left to see all data
Rebalancing
Tolerance per asset
Yearly Half Yearly Quarterly 5% 10%
-62.03
Sep 1929 - Jul 1936
-61.92
Sep 1929 - Jan 1936
-62.39
Sep 1929 - Dec 1935
-63.77
Sep 1929 - Mar 1936
-63.33
Sep 1929 - Jun 1936
-31.73
Mar 1937 - Jan 1943
-32.21
Mar 1937 - Jan 1943
-32.54
Mar 1937 - Jan 1943
-32.41
Mar 1937 - Jan 1943
-32.60
Nov 2007 - Oct 2010
-30.55
Nov 2007 - Oct 2010
-31.30
Nov 2007 - Oct 2010
-31.82
Nov 2007 - Oct 2010
-31.92
Nov 2007 - Dec 2010
-32.08
Mar 1937 - Dec 1942
-27.28
Jan 1973 - Jan 1976
-28.10
Jan 1973 - Jan 1976
-28.11
Jan 1973 - Jan 1976
-28.42
Jan 1973 - Jan 1976
-29.53
Jan 1973 - Jan 1976
-21.56
Sep 2000 - Jan 2004
-22.57
Sep 2000 - Feb 2004
-21.94
Sep 2000 - Jan 2004
-22.23
Sep 2000 - Jan 2004
-21.63
Sep 2000 - Feb 2004
5 Worst Drawdowns - Average
-34.63 -35.22 -35.36 -35.75 -35.83
10 Worst Drawdowns - Average
-26.86 -27.08 -27.16 -27.47 -27.84

For a deeper insight, please refer to the Stocks/Bonds 60/40 Portfolio: ETF allocation and returns page.