medium · Certified Financial Planner Investment Planning
A planner is reviewing the Yamamoto's brokerage account and notices they have not rebalanced in two years. The current allocation has drifted from 60/40 to 75/25 equities to bonds. The Yamamotos are hesitant to sell equities because of the potential tax bill.
Which rebalancing policy would minimize turnover while maintaining risk control?
- A calendar-based policy that rebalances on the first business day of every month.
- A hybrid policy that checks the portfolio quarterly and acts only if a 5% threshold is breached.
- A constant-proportion policy that rebalances whenever any position moves by 1%.
- A 'sell winners only' policy executed whenever an asset class reaches an all-time high. under the facts given in the stem
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