The Role of Portfolio Monitoring in Trading and Rebalancing

Imagine you are a portfolio manager overseeing a diversified investment portfolio for an individual client. Your client has a long-term investment horizon and is focused on both growth and capital preservation. After monitoring the portfolio's performance over the past quarter, you notice some sectors are outperforming while others are underperforming.

Your task is to discuss the importance of portfolio monitoring in the context of trading and rebalancing. Specifically, address how effective monitoring can impact decision-making regarding asset allocation, risk management, and overall portfolio performance. Include examples to support your points.