Rule-based portfolio rebalancer for mixed (stocks/bonds/cash/crypto) allocations

Investing—it doesn’t have to be crazy. In response to uncertainty and concern around navigating the recent markets, seen within some of the communities and podcasts I follow, I thought it useful to post a reminder that there’s an alternative approach to investing, that has worked for me, and might work for you. Imagine you have a hypothetical core asset allocation like: 1. Stocks (30%) 2. Bonds (30%) 3. Cash (30%) 4. Crypto (10%) And within Crypto you might have an allocation like: 1. BTC (50%) 2. ETH (25%) 3. SOL (25%) The investing approach is the following: 1. Rebalance within the core allocation any time an asset class is off by 25%, that means if stocks were 30% x 1.25 = 37.5%, then you’d sell stocks to get back to 30%, and put the funds into those asset classes that have dropped relative to their targets. For traditional assets, this approach is known to compound value over long periods of time. 2. Only rebalance into and out of the crypto asset class. Within crypto itself, use discretion in managing your allocation. As such a young asset class, it hasn’t been demonstrated that rebalancing *within* crypto is beneficial. 3. Having cash as a core allocation asset both serves as an emergency fund, and allows you to buy unnatural dips, like cascading liquidations. This rules-based method will ensure you capture profits, and takes the guesswork out of buying/selling. On the other hand, it may not produce the same level of profits if you happen to correctly time market and cycles (which is exceedingly hard to do.) Finally, remember when thinking about risk, there are actually three dimensions to it: 1. Tolerance for — Can you stomach the volatility of the allocation you have selected? This has been demonstrated to very hard to self-asses. Most people over-estimate their tolerance for volatility, and discover that at the worst possible time. 2. Need for — Given your financial and life situation, do you need to take on the risk that you are taking? 3. Capacity for — If you are approaching retirement, and have just enough savings to cover your foreseeable expenses, then perhaps you do not have the capacity for much risk, whereas if you’re 20, and have much more human than financial capital, then your capacity for risk may be large. In conclusion, the fundamentals and logic behind this systematic approach is described in my free book. https://t.co/LZMGo4MBtb