Micro Rebalancing vs Buy and Hold: 2-Year Real Money Test
Share
I tracked every single trade for over 800 days. Here's what happened when I rebalanced instead of just holding.
The Setup
In 2020, I started an experiment that most investors are never able to achieve: a mechanical, rule-based investment system that does not rely on predictions, opinions, or feelings.
I took two of the most popular ETFs—SPY (S&P 500) and QQQ (Nasdaq 100)—and instead of buying and holding as everyone recommends, I actively rebalanced them using a mechanical system called Micro Rebalancing or Index Rebalancing in this case, using major ETFs as a starting position.
No predictions. No market timing. No hoping the "experts" were right.
Just a simple rule: when the price moved above or below my target allocation by a certain percentage, I bought or sold to bring it back in line.
The test ran through:
- The 2020 bull market
- The March 2020 COVID crash
- The 2021 melt-up
- The brutal 2022 bear market
- The 2023 recovery
Over 800 days. Every trade documented. Every dollar tracked.
Here's what I found.
QQQ Results: Index Rebalancing Beat Buy-and-Hold by 145%
Let's start with the most dramatic example.
Investment: $10,000 initial capital in QQQ Time period: January 2020 - December 2022 Strategy: Mechanical rebalancing using 5% strike zones
The Numbers
Buy-and-Hold Strategy:
- Ending value: $14,738
- Gain: $4,738 (47.38%)
- Shares owned: 47 shares
Index Rebalancing Strategy:
- Ending value: $36,127
- Gain: $26,127 (261.27%)
- Shares owned: 413 shares
- Additional profit: $21,389 (145% better)
You read that right. The same $10,000, the same stock, the same time period—but $21,389 more profit just from MicroRebalancing mechanically.
How Is This Possible?
The secret is deceptively simple: buy low, sell high, repeat.
When QQQ dropped during the 2020 crash and 2022 bear market, the Micro-Rebalancing system automatically bought more shares at lower prices. When it rallied in 2020-2021, it automatically took profits at higher prices.
Buy-and-hold just sat there. Watched the crash. Watched the recovery. Did nothing.
Rebalancing turned volatility into profit.
Watch the Proof
I recorded a 2-minute walkthrough showing every trade, every number, every spreadsheet:
You can verify everything yourself. No tricks. No cherry-picking.
SPY Results: Index Rebalancing Beat Buy-and-Hold by 52%
QQQ is volatile, so maybe that was a fluke. Let's look at something more conservative: SPY (the S&P 500).
Investment: $20,000 initial capital in SPY Time period: January 2020 - December 2022 Strategy: Same mechanical rebalancing system
The Numbers
Buy-and-Hold Strategy:
- Ending value: $27,703
- Gain: $7,703 (38.52%)
Index Rebalancing Strategy:
- Ending value: $42,233
- Gain: $22,233 (111.17%)
- Additional profit: $14,530 (52.45% better)
Even with the "boring" S&P 500, MicroRebalancing crushed buy-and-hold.
The 7-Minute Forensic Breakdown
For SPY, I created a detailed walkthrough showing:
- How cost basis tracking works
- Why share accumulation matters
- The exact mechanics of each rebalance
- How the 2022 crash became an opportunity
Warning: It's nerdy. But if you want to understand exactly how this works and see a true dollar-for-dollar comparison, watch it.
Why MicroRebalancing Works (The 5 Principles)
This isn't magic. It's just combining five proven investment principles that most people use separately:
1. Rebalancing
When your portfolio drifts from your target, you bring it back. This forces you to sell high and buy low.
2. Dollar-Cost Averaging (DCA)
You buy more shares when prices drop. But instead of doing it on a calendar, you do it when prices actually fall.
3. Profit-Taking
You lock in gains when prices rise above your target. No guessing about "tops."
4. Averaging Down
When good investments get cheaper, you buy more. Warren Buffett calls this "being greedy when others are fearful."
5. Mechanical Consistency
No emotions. No predictions. Just follow the rules. The system works whether you're scared or euphoric. Steady gains outperform volatile portfolios most of the time.
The difference: Most investors use these principles randomly or emotionally. Index Rebalancing uses them systematically, every single time.
The 2022 Crash: Where MicroRebalancing Proved Itself
Anyone can make money in a bull market. The real test is what happens when everything falls apart.
In 2022, the market crashed. The S&P 500 fell over 25%. QQQ dropped even more.
Buy-and-hold investors: Watched their portfolios bleed. Did nothing. Hoped it would come back.
Index Rebalancing: Automatically bought shares at lower and lower prices. Accumulated positions. Prepared for the recovery.
When the market bounced back in late 2022 and 2023, guess who had more shares?
The crash wasn't a disaster. It was an opportunity the system exploited automatically.
What This Means for You
If you're sitting on a portfolio right now, waiting and hoping it goes up, you're leaving money on the table.
Every time your positions swing up or down—which they do constantly—you could be rebalancing. Taking profits. Buying dips. Accumulating shares.
But most investors don't because:
- They don't have a system
- They're afraid of "timing the market"
- Their financial advisor tells them to "stay the course"
- They think rebalancing is too complicated
Here's the truth: Index Rebalancing isn't market timing. It's the opposite. It's a mechanical response to price movements that requires zero predictions.
You don't need to guess if the market will go up or down. You just need rules and the discipline to follow them.
The Three Questions Everyone Asks
1. "Isn't this just timing the market?"
No. Market timing means predicting the future ("I think stocks will crash next month, so I'm selling").
Micro-Rebalancing or Index Rebalancing means responding to the present ("The price dropped 5% below my target, so I'm buying according to my rules").
One requires a crystal ball. The other requires a calculator.
2. "What if I miss the recovery?"
You won't. Because you never fully sell out.
The system maintains your target allocation. You're always invested. You're just adjusting position size based on price.
In fact, rebalancing makes you more invested during crashes (when prices are low) and less invested during peaks (when prices are high).
3. "This seems too good to be true. What's the catch?"
The catch is discipline.
The system tells you to buy when everything feels scary (2020 crash, 2022 bear market). It tells you to sell when everything feels great (2021 peak).
Most people can't do that. They override the system with emotions.
The second catch: you need fractional shares and zero commissions. Twenty years ago, this strategy wasn't practical. Today, every major broker offers both.
Where to Start: The Beginner-Friendly Version
If you're intrigued but intimidated, I have good news.
You don't need to start with volatile QQQ or complex systems. You can start with the safest version of this strategy: Index Rebalancing with ETFs only.
I wrote a complete guide called Index Rebalancing: The Smarter Way to Invest in ETFs. It teaches you:
- How to set up your first Micro Rebalancing system
- How to choose strike zones (the percentages that trigger trades)
- How to calculate target allocation (your position size)
- How to track everything in a simple spreadsheet
- Real examples using SPY, QQQ, and VOO
It's 56 pages. Interactive PDF. Visual examples. No fluff.
Regular price: $10
Right now: $5 (limited time)
This is the exact system I used for the results above. Same principles. Same mechanics. Just explained step-by-step for beginners.
[Start with Index Rebalancing for $5 →]
Want the Advanced Version?
If you're ready for the full system—including individual stocks, dynamic target allocation, technical indicators (VIX, MACD, RSI), and 30 years of backtesting—check out MicroRebalancing: The Art of the Micro-Rebalance.
It's 270+ pages of simulations, real trades, and advanced optimization techniques.
[See MicroRebalancing Standard Edition →]
The Bottom Line
You can keep doing what everyone else does: buy, hold, hope.
Or you can use the same volatility that scares most investors to systematically build wealth.
I've shown you the proof. The trades are documented. The spreadsheets are public. The videos walk through every detail.
The only question is: what will you do differently?
Ready to learn the system?
Start here: [Index Rebalancing for $5 →]
Want to verify the proof first?
See all the trade logs, spreadsheets, and videos: [Proof Page →]
Have questions?
Email me: [contact page]
Disclaimer: Past performance does not guarantee future results. This is not financial advice. I'm not a licensed financial advisor. Index Rebalancing involves active trading and may not be suitable for all investors. Do your own research and consult with a qualified professional before making investment decisions.