Is portfolio optimization a high turnover strategy?
No. The principle underlying portfolio optimization is diversification, which reduces risk. Intuitively, people understand and accept this concept. Consider the familiar admonition: “Don’t put all your eggs in one basket.” Portfolio optimization simply confirms that admonition, mathematically indicating what intuition suggests. The result is a well-diversified portfolio designed to allow its distinct elements to work together as a unit. When done properly, the portfolio does not require frequent rebalancing.
