Glossary · Portfolio operations
Drift
Drift is the gap between a portfolio's target allocation and its actual holdings, created by market movement, cash flows and trades that were not made.
Drift is not a defect. A portfolio that never drifts is a portfolio being traded too often. The question is how far it is allowed to move before somebody acts, and whether that threshold was chosen deliberately or inherited from a default.
Drift is also where a firm's stated process meets its actual behavior. A firm that documents a five percent band and rebalances at nine has a documentation problem as much as a portfolio one.
Read more: Risk tolerance is not one question →
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