Unlocking the Secret to Maximizing Portfolio Returns Through Rebalancing
The diversification return in a rebalanced portfolio comes from selling assets that have gone up and buying those that have gone down, not just reducing risk. This is different from a buy-and-hold strategy where the best-performing assets become a bigger part of the portfolio. By understanding this, we can explain the return of commodity futures more clearly. Diversification return can be a significant source of profit for any rebalanced portfolio with volatile assets.