What is a key characteristic of a constant mix strategy under Perold Sharpe analysis?

A constant mix strategy is defined by the principle of maintaining a predetermined allocation between different asset classes, typically equities and fixed income. In this strategy, the investor aims to keep their asset allocation constant by periodically rebalancing their portfolio to align with their target weights.

Rebalancing to increased equity weights in periods of weakness is an integral part of this strategy because it allows the investor to buy assets at presumably lower prices, taking advantage of market dips. This contrarian approach aligns with the fundamental premise of buying low and selling high, capturing the potential for higher long-term returns once the market recovers.

In contrast, holding a fixed allocation at all times does not reflect the active management involved in maintaining a constant mix. Simply put, the investor adjusts to realign their exposure, differentiating this strategy from a strictly static allocation.

Although consistent purchasing of stocks can occur in various investment strategies, it does not specifically characterize a constant mix strategy, as the focus there is more on the rebalancing aspect rather than uninterrupted buying.

Finally, a constant mix strategy is not limited to bond investments; it broadly encompasses various asset classes, including equities. Therefore, focusing solely on bond investments does not align with the essence of the strategy. Overall, the key characteristic of a