Rebalancing Strategies in Portfolio Management

David is an investment advisor managing a $10 million diversified equity portfolio for his client, who has a long-term investment horizon and a moderately aggressive risk tolerance. Initially, the portfolio is allocated as follows: 40% U.S. equities, 30% international equities, and 30% fixed income.

Over the past year, the U.S. equities have performed exceptionally well, contributing significantly to the overall value of the portfolio, now worth $12 million. As a result, the allocation to U.S. equities has increased to 50%. The international equities have stagnated, and the fixed income allocation has decreased slightly due to interest rate fluctuations.

David is considering different rebalancing strategies to restore the original asset allocation and manage risk. Discuss the various rebalancing strategies that David could employ. In your response, explain the advantages and disadvantages of each strategy and determine which strategy you would recommend for David in this specific scenario.