Every month, rebalance the portfolio so that 60% of the portfolio's weight is in the S&P 500 ETF (SPY) and 40% is in long term treasuries (TLT).
Performance and strategy calculations use adjusted close, including split and dividend adjustments. Quantities are adjusted simulation units.
Why does it work?
Rebalancing your portfolio to a strategic allocation of 60% stocks and 40% bonds works because it allows you to buy assets that have fallen in value and sell assets that have gone up in value on a regular basis.
For example, during a recession, as people flee from risky assets such as stocks into safe assets such as bonds, we can expect stock prices to fall and bond prices to go up. As a result, your portfolio's stock weightage will fall below 60% and your bond's weightage will increase above 40%. By rebalancing your portfolio back to a 60 - 40 mix, you are buying more stocks when they are cheap and selling bonds that are expensive during a recession. This increases the risk adjusted returns of your portfolio.
What is the performance?
From 1 July 2005 to 8 September 2026, this adjusted-price backtest in USD returned 8.3% annualized, compared with 11.2% for SPY, the S&P 500 ETF benchmark. Annualized volatility was 10.9% versus 19.1%, and maximum drawdown was 31.2% versus 55.2%. The Sharpe ratio was 0.79 versus 0.65.
