The strategy can work to an extent, if used as part of a strict asset allocation program. If, for example, under a 60/40 equity/bond program you periodically adjusted by selling the portion that rose and then buying what fell, you would have strategic implementation. Doing so by precise formula would be your discipline.
However, this strategy makes it difficult to observe duration principles on bond holdings. There are times when the proportion of long-term, intermediate and short-term bonds have to be arranged to meet investor cash needs, and duration becomes a factor.
This rearrangement of assets can also cause a good deal of taxable trades in accounts that are not tax-deferred, such as retirement. Selling for asset adjustment can make taxable events, and have to be kept to a minimum.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)
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