Drift Tolerance

The drift tolerance is the percentage change or drift from ideal that you will allow before executing a rebalancing trade to bring the portfolio back into balance. For example, if you have a balanced target allocation of 10% for a position, and if it currently has a 12% allocation, then the drift is 2% from ideal. If your drift tolerance was set to 3, portfolio rebalancing would not plan a trade. However if the drift tolerance was set to 1, a trade would be planned to get back to the balanced percentage.

Rebalancing


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