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Portfolio Rebalancing Calculator Guide
Enter what you hold and what you want to hold. This shows exactly what to buy and sell to get back to your target allocation.
Target value = portfolio total × target %
Action = target value − current value
A $100,000 portfolio at 70/30 with a 60/40 target: sell $10,000 of stocks, buy $10,000 of bonds.
Drift Is the Whole Problem
You set 60/40 and then do nothing. Stocks run for three years and you're at 75/25 without making a single decision.
That's the trap: your portfolio quietly became far riskier than you chose, precisely because things went well. And the drift always leaves you heaviest in whatever just ran hardest — which is exactly when a fall costs you most.
Rebalancing Forces the Unnatural Trade
It makes you sell what's been winning and buy what's been losing. Every instinct says do the opposite.
That discomfort is the mechanism working. It isn't a return-maximising strategy — over long bull runs, rebalancing out of stocks usually costs you money. It's a risk-control strategy. You're paying some upside to avoid waking up in a crash with 85% in equities you never consciously chose to hold.
Use New Money First
If you're contributing anyway, direct the new money into whatever is underweight. You reach your target without selling anything, which means no realised gains and no tax bill in a taxable account.
This is the single most useful rebalancing habit, and it costs nothing. It only stops working once contributions are small relative to the portfolio — at which point you'll have to sell something.
How Often
Annually, or when something drifts more than about five percentage points from target. Both work.
More often is worse, not better — you rack up costs and taxes chasing precision that doesn't exist. There's no evidence that monthly rebalancing beats annual, and plenty that it costs more. Pick a rule and follow it, because the rule exists to stop you improvising during exactly the market conditions where improvising is most tempting.
Do It in Tax-Sheltered Accounts Where You Can
Selling to rebalance inside a retirement account is usually a non-event for tax. The same trade in a taxable account can realise gains. If you hold both, rebalance where it's free before touching where it isn't.
Related: retirement calculator, ROI calculator, compound interest calculator.
These results are estimates for education and planning, not financial advice. Actual returns, rates, and terms vary — check with a qualified professional before making decisions.
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