“Strategic asset allocation is a constant-mix strategy. It requires that a portfolio is rebalanced in order to maintain a prescribed allocation.”
It is the answer of a Schweser’s Question Bank question. I can’t get the logic of this sentence, can anyone explain it?
Which part exactly? It’s pretty self-explanatory really. Strategic Asset Allocation is a constant mix strategy because the weight of the holding do not change (e.g you’d like to have 60% equity 40% fixed income mix). If you want to keep this prescribed constant mix, you will need to rebalance your portfolio, otherwise the allocations will change as the value of the underlying change.