Constant mix strategies continually rebalance a portfolio back to a target weight. When stocks rise, a constant-mix program sells. When stocks fall, the program rises. If the market continues jumping up and down regularly, the strategy will result in a rising portfolio value. Constant proportion strategies sell when stocks are down and buy when they’re up. They outperform during strong upward or downward movements but get whipsawed by volatility in a trendless market. A buy-and-hold portfolio’s value would ebb and flow, lagging constant mix in a volatile, trendless market and lagging constant proportion in a trending market |
