TY - JOUR T1 - Intelligent Rebalancing JF - The Journal of Investing SP - 31 LP - 42 DO - 10.3905/joi.2018.27.1.031 VL - 27 IS - 1 AU - Robert A. Brown Y1 - 2018/02/28 UR - https://pm-research.com/content/27/1/31.abstract N2 - The rebalancing rule applied to a multiasset class portfolio will have significant impact on both risk and return. All portfolios managed to a fixed-weight policy asset allocation using non-market-cap weights require periodic rebalancing because failure to rebalance drives realized asset weights further and further away from policy with the passage of time. The most common approach to rebalancing adopted by the registered investment advisor, broker/dealer, and bank trust department segments of the investment industry is fixed time (e.g., monthly or quarterly). This article demonstrates that frequent fixed-time rebalancing rules are the most harmful to both risk and return, serving to increase risk and to reduce return. Improvements can be made by rebalancing less frequently. Additional enhancements to both risk and return can be obtained by following rebalancing rules that reflect recent market behaviors (i.e., are path dependent).TOPICS: Portfolio construction, portfolio theory ER -