Does this investment strategy have a name?

Question

I've heard this strategy described somewhere and I want to learn more about its history, theory, practice, etc. The problem is that I don't know what it is called so I don't know what to Google.

The strategy is that you invest a specific amount, say $1000, into an asset, say gold, and whenever that asset changes price by a certain amount you adjust your investment back to $1000. It goes down 5%, you buy a little. It goes up 5% you sell a little. So you are always buying low and selling high. As long as the price is fluctuating or going up, you'll be making a profit.

What is this strategy called?

score 7 · Accepted Answer · answered Dec 03 '14 at 17:15

Rebalancing would be the general idea of maintaining a specific mix when investing, as something you don't mention is how much cash do you have to invest as if what you invest in keeps dropping as Joe Taxpayer points out then you'd be buying and buying and possibly never selling and thus don't profit. For example, if you bought Detroit bonds a few years ago and then bought more as they went down then the city declared bankruptcy that could mean quite the loss for some people.

score 2 · Answer 2 · answered Dec 03 '14 at 17:00

2

This is a form of dollar cost averaging. Use that as a term on a search engine will reveal several other variations of this strategy.

answered Dec 03 '14 at 17:00

CQM

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score -1 · Answer 3 · edited Apr 13 '17 at 12:25

-1

Sounds most similar to value averaging, which I learned about from this site just a few days ago.

edited Apr 13 '17 at 12:25

Community

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answered Dec 03 '14 at 21:39

Craig W

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Does this investment strategy have a name?

3 Answers3