Growing Wealth with Fixed-Mix Strategies

Abstract

This chapter surveys theoretical research on the long-term performance of fixed-mix investment strategies. These self-financing strategies rebalance the portfolio over time so as to keep constant the proportions of wealth invested in various assets. The main result is that wealth can be grown from volatility. Our findings demonstrate the benefits of active portfolio management and the potential of financial engineering.

Keywords: Volatility, Constant proportions strategies, Fixed-mix strategies, Financial markets, Investment, Exponential growth, Transaction costs

JEL Classification: G11