The slow death is when a single asset continues to decline in value. Week over week, it slowly continues to decrease in value.

This graph illustrates a slow death. The white line is the price of a single asset in a portfolio. The orange line is the value of the portfolio if the HODL strategy is used from beginning the end. The blue line is the value of the portfolio if a rebalance was performed at the white dot. Result: HODL beats rebalancing. The innovative investor should watch their portfolio to detect this type of slow decline.

HODL

HODLing an asset which is having a slow death results in a net decrease in total portfolio value. However, this slow death does not affect the value of any other holding. So while the total value of the portfolio is decreasing, the subset of the portfolio which excludes the asset which is having a slow death, does not have any decrease in value.

Rebalance

Rebalancing into an asset which is having a slow death decreases portfolio value. In addition to the value of the individual asset declining, it is actually also declining the value of the rest of the assets in the portfolio as well. So, this means that both this individual asset as well as the rest of the portfolio is bleeding.

Conclusion

This is a undesirable situation to be in when rebalancing. Continually rebalancing into a dying asset will drag the entire portfolio down with it. If you are using a periodic rebalancing strategy, it is important to monitor your assets to ensure this is not the case for your portfolio. Having a diverse portfolio will also mitigate these risks since a smaller percentage of the total portfolio value will be held by the single asset.

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