The second option because you should have a target allocation that you are comfortable with and stick to that. If you want 70% stocks and 30% bonds, there's no reason to have 75% stocks and 25% bonds for part of the year. Also, since stocks have higher returns, the share of your portfolio consisting of stocks will increase over time. You need to buy more bonds because they fall behind in value.
There's a widespread (but erroneous) belief that you are buying things at a "discount" when they are lagging behind another asset. But if a stock goes from $100 to $200, then the company misses earnings targets and the stock drops to $120... are you getting a "discount" relative to the $200 price? No: that price was based on earnings growth that didn't happen and you shouldn't expect the price to jump back to $200. You're not getting a good deal just because the people who paid $200 got an even worse price.
There's a widespread (but erroneous) belief that you are buying things at a "discount" when they are lagging behind another asset. But if a stock goes from $100 to $200, then the company misses earnings targets and the stock drops to $120... are you getting a "discount" relative to the $200 price? No: that price was based on earnings growth that didn't happen and you shouldn't expect the price to jump back to $200. You're not getting a good deal just because the people who paid $200 got an even worse price.
Statistics: Posted by HKexpat — Sat Oct 12, 2024 12:22 am