I don’t know. But the folks at Marcellus know. They call it ‘Post-facto rebalancing’.
…we stay fully invested at all times and rebalance our portfolio in two ways to benefit from a stock market crash. Firstly, after a crash, we rebalance the portfolio to increase our allocation to companies that have undergone high drawdowns (we finance this investment by shaving off our allocations to companies that have NOT undergone high drawdowns). Secondly, after the share prices of our portfolio companies have recovered, we again consider rebalancing the portfolio to sell some allocation in companies that have seen a sharper recovery than the rest of the portfolio. Such rebalancing is also carried out if share price dislocations happen without a broader stock market crash.
How Portfolio Rebalancing Tools Enhance Investors’ Returns
They even have an real life example and discuss on the pros and cons later in the newsletter.
