Exercise 2: What Rebalancing a Drifted 82/18 Portfolio Actually Involves — Possible Solution
====================================================================

The portfolio's original real target was 70% stocks / 30% bonds. After
several strong years for stocks, it has genuinely drifted to 82%
stocks / 18% bonds - stocks now make up 12 percentage points more of
the portfolio than originally intended, and bonds make up 12
percentage points less.

WHAT REBALANCING WOULD INVOLVE DOING
Per this chapter's own real definition, rebalancing means selling a
portion of whatever has grown to be overweight and buying more of
whatever has become underweight, restoring the original target mix.
Applied to this specific portfolio, that means selling enough of the
now-overweight stock holdings, and using the proceeds to buy enough
additional bonds, to bring the allocation back from 82/18 to the
original real target of 70/30.

WHY LEAVING IT AS 82/18 IS A REAL, MEANINGFUL DEPARTURE FROM THE PLAN
This isn't a trivial or cosmetic difference. A 12-percentage-point
shift toward stocks represents a real, substantially higher-risk
portfolio than the investor originally chose - stocks carry higher
real volatility than bonds, per this course's own earlier material, so
an 82% stock allocation would react far more severely to a downturn
like Chapter 8's own dot-com bubble example than the original 70%
allocation would have. The investor's own original decision reflected
their genuine risk tolerance and risk capacity at that time; simply
letting the allocation drift means the portfolio no longer actually
reflects that original, deliberate decision, even though no one
consciously chose to take on more risk.

WHY THIS CAN HAPPEN WITHOUT ANY DELIBERATE CHOICE
This chapter's own material explains precisely why this drift occurs
even with no active decision involved: different asset classes grow at
different real rates, and stocks outperforming bonds over "several
strong years" is exactly the kind of uneven growth that mechanically
shifts a portfolio's own proportions over time, entirely independent of
the investor's own intentions.

WHY THIS MATTERS
Recognizing the 82/18 split as a genuine departure from the plan,
rather than simply "the portfolio doing well," is what makes clear why
rebalancing - even though it involves the counterintuitive step of
selling some of the better-performing asset - is a real, deliberate
maintenance action rather than an unnecessary interference with success.

ANSWER: Rebalancing this portfolio would involve selling enough of the
now-overweight stock holdings and buying enough additional bonds to
bring the allocation back from its drifted 82% stocks / 18% bonds to
the original real target of 70% stocks / 30% bonds. Leaving it as is
would be a real, meaningful departure from the original plan because
the extra 12 percentage points in stocks represents a substantially
higher-risk portfolio than the investor deliberately chose, exposing
them to more real volatility than their own original decision
reflected - a shift that happened purely through uneven asset growth,
not any conscious choice to take on more risk.

WHY THIS WORKS AS AN ANSWER
------------------------------
This correctly describes the specific mechanical action rebalancing
requires (sell overweight, buy underweight, restore the target), and
explains why the drifted allocation represents a genuine, meaningful
increase in risk rather than a neutral or positive outcome simply
because stocks performed well.