What is a Constant Ratio Plan?
Constant ratio plans are examples of an investing approach that defines the contents of a portfolio based on asset classification. Essentially, the constant ratio plan seeks to establish a balance between the types or classes of investments that are maintained as part of the investor’s holdings. The purpose of this kind of investment strategy is to make it possible to stabilize the value of the portfolio by moving money between the assets so that a minimum overall worth is maintained, regardless of the performance of the individual securities. In a sense, the constant ratio plan is somewhat like applying the principle of a scale. When items on each side of the scale are more or less equal, the scale is understood to be even. The same is true with a constant ratio plan. When all the securities are maintained at a certain value per class or type of security, the portfolio is balanced and considered to be even or level in nature. If one security begins to underperform, this throws the por
Constant ratio plans are examples of an investing approach that defines the contents of a portfolio based on asset classification. Essentially, the constant ratio plan seeks to establish a balance between the types or classes of investments that are maintained as part of the investor’s holdings. The purpose of this kind of investment strategy is to make it possible to stabilize the value of the portfolio by moving money between the assets so that a minimum overall worth is maintained, regardless of the performance of the individual securities. In a sense, the constant ratio plan is somewhat like applying the principle of a scale. When items on each side of the scale are more or less equal, the scale is understood to be even. The same is true with a constant ratio plan. When all the securities are maintained at a certain value per class or type of security, the portfolio is balanced and considered to be even or level in nature. If one security begins to underperform, this throws the p
