Portfolio Rebalancing

What this video covers

• What causes a portfolio's allocation to drift from its target, and why differing asset returns over time silently shift risk exposure
• How to identify overweight and underweight assets after a bull market, and what has happened to the investor's risk profile
• The buy-low, sell-high discipline that rebalancing enforces by selling recent winners and buying recent underperformers
• Why rebalancing maintains the investor's chosen risk level but does not reduce risk, and how this distinction appears in exam traps
• The calendar-based rebalancing method: rebalancing on a set schedule such as quarterly or annually
• The threshold-based rebalancing method: rebalancing only when an allocation drifts beyond a set percentage such as 5% off target
• Why the exam treats both calendar-based and threshold-based triggers as equally valid, since the goal is returning to target allocation