In 2010 AM session, there was a case where all asset classes would be rebalanced to Target asset alloc.
Can someone present a case where they would differ?
They would have differed in that question if none of the corridors were violated. Calendar would rebalance at the specified date and assuming no violations of the corridor, those weights would just remain the same at that point
I don’t see any reason/example why we should rebalance some asset classes to target weights and some not. (of course excluding rebalancing to allowable bands). Thus, as my current knowledge says, always rebalance all classes to their targets, even when just one is out of allowable rage.
Ok so consensus is if 1 single asset class moves away from its target, then all classes should be rebalanced?
Doesnt make sense why i would rebalance all but ok i guess…
sure it does…if you rebalance one (lets say you reduce the allocation to bonds so you sell bonds) now you have cash. you have to put that cash to work so you buy another asset class (eg equities) so buy reducing the allocation to bonds and implicitely have to increase the allocation to equities (or some other class) so at least one other asset class will be affected.
I have asked this question last week and the consensus was that if one asset class violates target we have to rebalance the whole portfolio. It make sense, as Dbonder explained.
Yes, if one class violates you are either buying more of it or selling some of it. That cash needs to come from or go somewhere. And that would be to/from other class weights
got it now thanks!