A balancing act of stocks and bonds
While it’s good investment practice to build a portfolio that comprises a mix of stocks and bonds, it’s as important to rebalance it periodically
ASHBURTON INFLATION ETF Share price: R20.62JSE code: ASHINF BUY CLASSIC INVESTMENT of mixed stocks and bonds. Investors should pick a ratio, say 30% bonds and 70% stocks, and then rebalance their portfolios once a year or so. This way, if stocks have had a strong run, the investor banks some winnings by selling stocks and buying bonds, and vice versa. This automates the discipline of buying low and selling high, as Benjamin Graham argued in The Intelligent Investor. Until the arrival of exchange traded funds (ETFs), this was not practical for SA retail investors because the local bond market is only accessible to institutions. Things have improved thanks to three ETFs offered by Absa: Ashburton Inflation, which tracks the government inflation-linked bonds index; NewFunds Govi, which tracks the SA government bond total return index; and NewFunds ILBI, which offers a basket of government inflation-linked bonds selected by Absa’s indexing system. My bias is towards the Ashburton produc...
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