Introduction
I plan to read the book chapter from the book "The boglehead guide to investing".
Revert to the mean (RTM)
Rebalancing may also improve your returns, since asset classes have had a tendency to revert to the mean (RTM) over time. By rebalancing, you’re selling a portion of your winning asset classes before they revert to the mean (drop in price) and you’re buying more of your underperforming asset classes when their prices are lower, before they revert to the mean (increase in value). So, you’re selling high and buying low. If you believe in RTM, rebalancing could increase your returns. Jack Bogle believes in RTM, and we do, too.
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