There is a statement that Constant Mix is appropriate for an investor whose risk tolerance varies proportionately with wealth.
This confuses me. I get that as the portfolio increases, there is a gradual larger absolute dollar amount of equity, but the proportion remains the same. How is that varying with wealth?
Plus as the portfolio value is falling because of a downtrending market, we keep buying equity…that is almost an inverse proportion to wealth.
Can somebody clear this up for me?