Rebalancing a Portfolio to Align with Investment Objectives

Medium Investment Policy And Allocation Rebalancing

A portfolio manager is evaluating the investment strategy of a client who has a strategic asset allocation set at 60% equities and 40% fixed income. Due to market fluctuations over the past year, the current allocation has shifted to 70% equities and 30% fixed income. The client wants to maintain the original allocation.

What is the primary reason for the portfolio manager to rebalance this client's portfolio back to the original allocation percentage?

To improve the portfolio's expected return.

To reduce the portfolio's risk profile.

To align with the client's risk tolerance and investment objectives.

Hint

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