In response to Chris's comment above...it seems that some people (namely statistics people) have trouble with the coin flipping example. And there have been some critics of the idea that rebalancing can enhance returns. The best articulation of this is in Chambers and Zdanowicz "Limitations of Diversification Return". They point out correctly that the expected wealth (and expected return) is indeed growing over time. However the expected mean return is not a great descriptor of the central tendency of the final wealth distribution. The median (zero) is much better. Even if you are not a statistics person, its easy to understand that you should expect to have about an even number of heads and tails over any trial...thus, by construction, you should expect no growth in this example. The full article "Volatility Harvesting in Theory and Practice" is coming out in the Winter 2015 issue of Journal of Wealth Management. In it I avoid discussing coin flipping and focus on investments. I hope the new paper addresses the issues raised by critics. Rebalancing can add value and there is also risk of underperforming. But just because there is risk, doesn't mean its a bad idea to rebalance.