Larry McDonald's recent blog post discusses some critiques of dividend investing. I can't say I'm either for or against dividend investing, but one of the critics is John Bogle, who pretty much invented indexed mutual funds.
As blasphemous as this may seem, I tend to take Mr Bogle's advice with a grain of salt after reading his arguments against rebalancing. Saying rebalancing is unnecessary is essentially saying that asset allocation is unimportant.
This is clearly goofy. How does Mr Bogle justify this stance?
He justifies it by demonstrating that the additional returns from rebalancing are negligible. Well, as a believer in the efficient-market hypothesis, I could have told you that.
Rebalancing is not about maximizing returns. It's about managing one's exposure to risk. In fact, I'm actually mildly surprised that a rebalanced portfolio beat a non-rebalanced one at all. That means you are getting reduced risk at no cost! It seems to be one of the few free rides available in the investing world.