A client's strategic asset allocation is 70% equities, 30% fixed income. Their current portfolio value is $800,000, with $600,000 in equities and $200,000 in fixed income. If their rebalancing trigger is a 5% deviation from strategic weight, should the portfolio be rebalanced?

Question: A client's strategic asset allocation is 70% equities, 30% fixed income. Their current portfolio value is $800,000, with $600,000 in equities and $200,000 in fixed income. If their rebalancing trigger is a 5% deviation from strategic weight, should the portfolio be rebalanced?

Answer options: ✅ Yes, equities are 75% ($600,000 / $800,000), a 5% deviation.

• No, equities are 75% ($600,000 / $800,000), a 2.5% deviation from target (70% + 5% = 75%).
• Yes, fixed income is 25% ($200,000 / $800,000), a 5% deviation.
• No, fixed income is 25% ($200,000 / $800,000), which is within the 5% tolerance of the 30% target.

Correct answer: Yes, equities are 75% ($600,000 / $800,000), a 5% deviation.

Explanation: The current equity weight is $600,000 / $800,000 = 75%. The strategic target is 70%. The deviation is 75% - 70% = 5%. Since the deviation meets or exceeds the 5% trigger, rebalancing is required to bring equities back to 70% and fixed income back to 30%.