Data:

Steve and Suzie, both forty-five years old, are aggressive investors; they have an investment portfolio that is worth over $250,000. Their target asset allocations are 60 percent equities and 40 percent bonds and cash; they have invested these assets in ten mutual funds. Their actual asset class weights are different from their targets because of the underperformance of the equity part of their portfolio.

Asset class	Actual  Weight	Target   Weight	Difference
Equity	70%	60%	10%
Bonds	20%	30%	–10%
Cash	10%	10%	0%

Application:

When should Steve and Suzie rebalance their portfolio, and how should they do this?