bonds, funds, Investing, money

Idea Publication: Investing Automation for improved dollar-cost averaging

Just a quick note to…

Get this idea out into the blogosphere before someone tries to patent it:

Flex-flow deposits that automatically (and dynamically) re-balance a portfolio.  A target asset allocation is set.  Weekly/monthly inflows are initially proportioned account to these ratios.  As time goes on and investments go up and down the inflows are adjusted to help keep to asset allocation close to target.  More $ are invested in under-weighted funds (below tgt funds) and less $ are invested in funds that are over asset allocation targets.

There are lots of neat mathematical/algorithmic implementations.  The simplest contributes to the most under-weighted fund 100% or whatever amount is need to bring into balance.  Then the next most out-of-balance fund… etc.  Another strategy is to perform a linear delta-weighted scaling factor.  Another means is any number of non-linear delta-weighted scalings.  In any case a unit-sum “percentage” vector (M-dimensional , where M is the number of funds in the target).

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