Lessons From Warren Buffett

Lessons from Warren Buffett: Rebalancing Your Portfolio – Marketing Gimmick or Investment Necessity?

Rebalancing your portfolio is a mantra often touted by the financial industry. If you don’t manage it yourself, they’ll gladly offer you an account or fund that does it automatically. Yet, Warren Buffett dismisses this concept, viewing it more as a marketing ploy than a sound investment strategy.

At the 2004 Berkshire Hathaway Annual Meeting, Buffett remarked, “The idea that you have, you know, you say, ‘I’ve got 60 percent in stocks and 40 percent in bonds,’ and then have a big announcement, now we’re moving it to 65/35, as some strategists or whatever they call them in Wall Street do. I mean, that has to be pure nonsense.”

Buffett advocates for a more opportunistic approach to investing. He suggests that your default position should always be in short-term instruments. “Whenever you see anything intelligent to do, you should do it. And you shouldn’t be trying to match up with some goal like that,” he advised.

For Buffett, asset allocation is often more about merchandising than genuine investment acumen. It’s a tactic designed to make investors feel they need expert help to decide between allocations like 60/40 or 65/35.

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© 2024 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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