Investing - Theory, News & General • Rebalancing vs. DCA

Dear Group,

Since I've been asking this question myself, I've conducted two hypothetical portfolio (PF) scenarios.

Portfolio I:
a) Two ETFS, SCHG (US Large-Cap Growth) and VBR (US Small-Cap Value).
b) Initial Investment: 1,500 USD
c) Monthly Additional Investment of 1,500 USD, together with a Monthly Rebalancing Target of 50% SCHG / 50% VBR
d) Investment Horizon: 30+ years

Portfolio II:
a) Two ETFS, SCHG and VBR.
b) Initial Investment: 1,500 USD
c) Monthly Additional Investment: 50%, that is, 750 USD, in SCHG / 50%, that is, 750 USD, in VBR
d) Investment Horizon: 30+ years

According to my calculations (link to the file further below), PF II, that is, Dollar Cost Averaging (DCA) yields the higher overall return.
To me, this makes sense, as that with PF II, I'd have allocated more of my investments to the better-performing ETF (SCHG) than with PF I.
Yes, PF II would have shifted toward SCHG, but shouldn't this analysis mean that DCA will always automatically lead your PF toward the better-performing ETF?

I'd appreciate your thoughts on this.

Best,

Alexander

Link to the Analysis

Statistics: Posted by dillastarr — Sun Aug 04, 2024 2:14 pm — Replies 5 — Views 1247

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