Drift band

A drift band, or rebalancing tolerance, is the amount a holding may deviate from target before a rebalance is triggered.

Bands are usually expressed as an absolute percentage of the portfolio or as a relative percentage of the target weight. The two produce very different behaviour on small positions: a five percent absolute band never triggers on a three percent holding, while a twenty-five percent relative band triggers frequently.

Whichever convention a firm uses, the requirement is that it is written down, applied consistently and defensible when a client asks why their portfolio was or was not traded.