标题: Buy and Hold strategy in rebalancing Question [打印本页] 作者: yospaghetti 时间: 2013-4-3 20:49 标题: Buy and Hold strategy in rebalancing Question
sorry if this has been asked before.
My confusion is on schweser notes book 5, page 50
the slope 0.6 indicates that 60% of total assets are originally invested in stock.
assuming initial investment of 10 dollars, 4 dollars in bills and 6 dollars in stock. stock price increases from 6 to 8 dollars. shouldn’t the total assets increase from 10 dollars to 12 dollars? I am not quite following what the slope 0.6 in that graph mean. Please help, thanks!作者: NakedPuts00 时间: 2013-4-3 20:52
All it means that when they started , the allocation to the equities are 60% and bonds are 40%.
In your example, total assets are increased from 10 to 12. As time passes, 60% allocation will go from 60 to more or less depending on the market direction.作者: bkballa 时间: 2013-4-3 20:54
slope is (chg in value of assets / chg in value of stock mkt). So since 60% is in stocks, when market goes up by 20%, value of assets will incr by 12% (i.e. 60% of 20%).
I think the payoff diagram is just a ‘snapshot’ for a pt in time, so once the market shifts, since it’s a buy and hold strategy, your allocations will change and the ‘slope’ of your portfolio will be different.
