Left alone, the mix drifts one way. Toward risk.
Equity compounds faster than debt, so its share of the pot creeps up every year you do not rebalance. Assume equity at 12 a year, debt at 6.5. A 60/40 you never touch does this.
| Untouched 60/40 |
Equity . Debt |
| Day 1 . the mix you chose | 60 / 40 |
| After 5 years | 66 / 34 |
| After 10 years | 71 / 29 |
Now the timing. That equity share climbs highest after a long run up, exactly when a fall is most likely. Say the market finally turns, equity minus 40, debt plus 2. The 60/40 you actually chose falls 23.2. The drifted 71/29 falls 27.8. That is 4.6 points of extra hole you never signed up for, and climbing back out needs 38.5 instead of 30.2.