PORTFOLIO COMPARISON / ONE VARIABLE

Annual vs No Portfolio Rebalancing Backtest

Hold a 60/40 VTI–BND portfolio constant and compare annual rebalancing with allowing the allocation to drift for ten years.

THE QUESTION

Did annual rebalancing improve the outcome, or mainly keep the portfolio closer to its intended risk?

BASE PORTFOLIOAnnual rebalancing
CONTROLLED CHANGENo rebalancing
ONLY CHANGED VARIABLEWhether target weights are restored each year

The base rules, data treatment, and calculation assumptions remain visible throughout the comparison. Review the portfolio backtest methodology used to interpret this result.

WHAT TO COMPARE

Read the trade-off as a system.

  1. 01Ending value
  2. 02Maximum drawdown
  3. 03Ending stock weight
  4. 04Risk drift

WHEN TO LOOK

Locate where the difference appeared.

Trending marketsRange-bound marketsSharp reversalsHigh-volatility periods

A useful comparison shows whether an advantage was broad or created by one unusually favorable period. For a direct test of this risk, compare the same rules across multiple portfolio start dates.

OBSERVED RESULT / REAL MARKET DATA

What the comparison actually produced.

Not rebalancing ended $3,297 higher because the stock sleeve was allowed to grow, but maximum drawdown deepened by 2.8 points. The higher return came with unintended equity-risk drift rather than a free rebalancing advantage.

WINDOWAug 2016–Jul 2026
CAPITAL$10,000 initial investment in 60% VTI / 40% BND
CALCULATIONThe annual portfolio resets to 60/40 once per calendar year. The comparison portfolio receives no trades after inception; distributions remain reinvested.
RuleEnding valueAnnualized returnMaximum drawdown
Annual rebalance$24,6429.44%−21.76%
No rebalance$27,93910.83%−24.56%

TEST ANOTHER ALLOCATION OR RULE

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