Harry Browne demonstrates the effectiveness of asset allocation and periodic balancing in his book "Why the Best-Laid Investment Plans Usually Go Wrong". It's

Harry Browne demonstrates the effectiveness of asset allocation and periodic balancing in his book "Why the Best-Laid Investment Plans Usually Go Wrong". It's an old book from 1987, but the principle is timeless. For example, I'm looking at a chart of his "Permanent Portfolio" from 1970 through 1987, which weights four asset classes equally at 25% each: gold, stocks, bonds, and cash. The portfolio has far lower volatility and far lower draw-downs than gold, stocks, or bonds alone. The portfolio also outperforms stocks or bonds alone. It does not outperform gold over this 17 year period, but by 1987 it comes close. It probably overtakes gold alone in subsequent years, since gold vastly underperformed the stock market from 1987 to 2001. One good aspect of asset allocation is that it keeps on the opposite side of manic up or down trends. This strategy would have you selling gold at $800 in 1980, and buying gold at $250 in 2001. Gold has vastly outperformed the stock market since then. Similarly, this strategy would have you buying stocks in 1974, when many people thought equities were "dead" and only fools were in the stock market. You might think these references are a little dated, but again the principle is timeless. Anyone who says "it's different this time" is probably wrong.