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Question
What is the key advantage of threshold-based rebalancing over calendar-based rebalancing?
1
It responds to actual portfolio drift rather than the passage of time, avoiding unnecessary trades when drift is minimal.
2
It always results in lower tax liability because trades are less frequent.
3
It guarantees higher returns by automatically buying at market lows.
4
It is simpler to implement because it requires no monitoring between fixed dates.
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