Understanding Transaction Costs in Portfolio Rebalancing

John Smith is a financial advisor responsible for managing a diversified portfolio for a high-net-worth client. He has recently decided to rebalance the portfolio due to shifts in asset allocation limits caused by significant market movements. As John prepares to execute trades, he is particularly concerned about the transaction costs associated with rebalancing.

Identify and discuss the key components of transaction costs that John should consider while rebalancing the portfolio. In your response, also analyze how different types of transaction costs can impact the overall investment performance and portfolio strategy.