What is a constant ratio plan?

Constant ratio plans, together with constant dollar value plans, are similar to buy-and-hold asset allocation strategies used in portfolio management, except that buy-and-hold strategies never rebalance. A constant ratio plan would ensure that a 70/30 or 80/20 asset allocation (stocks to bonds) remains 70/30 or 80/20 even as markets move.

What is the difference between constant dollar value plan and constant ratio plan?

While in both the Constant Dollar Value Plan and the Constant Ratio Plan, the equities portion is rebalanced at pre-determined periods based on whether stocks have risen or fallen, in the sense of pre-determined ratios, the Constant Ratio Plan goes beyond the Constant Dollar Value Plan by fixing a relationship between the two portions.

What is a constant-ratio plan?

The constant-ratio plan follows the constant-dollar plan in that they both consist of a speculative portion for greater capital gains and a conservative portion for lesser risk, but the constant-ratio plan maintains a specific ratio of speculative to conservative securities.