Rebalancing is not free — every trade incurs spreads, commissions, slippage, and taxes. The optimal policy balances drift control against transaction costs.

Practical levers:

Band width: wider bands (e.g., ±25% relative) reduce turnover but allow more drift.
Cash-flow rebalancing: direct new contributions and dividends to underweight sleeves — zero-cost rebalancing.
Asset location: hold high-turnover sleeves in tax-advantaged accounts.
Tax-loss harvesting: pair sales of winners with realized losses to offset gains.

Band policy	Annual turnover	Tracking error vs target
Monthly, ±1%	~35%	Very low
Quarterly, ±5%	~12%	Low
Annual, ±10%	~5%	Moderate
Never	0%	High (drift)

Rule of thumb: rebalance when a sleeve drifts more than 20–25% of its target weight, or on a fixed calendar, whichever comes first.