Execution Strategies for Rebalancing in Volatile Markets

During a recent market downturn, a portfolio manager is tasked with rebalancing a diversified equity portfolio. The manager must consider the execution strategies for this rebalancing amidst increased volatility and trading costs.

The portfolio currently holds large positions in technology and healthcare stocks that have significantly outperformed the broader market. The manager is contemplating whether to use a market order, limit order, or a combination of both to execute the trades effectively.

Discuss the considerations the portfolio manager should evaluate when choosing between different execution strategies. Include factors such as market impact, liquidity, and trading costs, and explain how these factors influence the decision-making process for trading and rebalancing in a volatile environment.