Reason for Portfolio Rebalancing

Easy Investment Policy And Allocation Rebalancing

A portfolio manager is overseeing a diversified investment portfolio with an original allocation of 60% equities and 40% fixed income. Due to a significant increase in the equity market, the current allocation has shifted to 70% equities and 30% fixed income. The manager is considering whether to rebalance the portfolio.

What is the primary reason for rebalancing the portfolio in this situation?

To maintain the risk profile of the portfolio as originally intended.

To increase potential returns by allocating more to equities.

To take advantage of short-term market volatility.

Hint

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