Finance Calc Kit

Why rebalance a portfolio?

Rebalancing restores your portfolio to a target asset allocation after market moves cause drift. When stocks outperform bonds, equity weight rises above target and risk increases. Rebalancing sells overweight assets and buys underweight ones, keeping risk aligned with your plan.

Vanguard and other research shows periodic rebalancing can reduce risk without sacrificing long-term return expectations. To see how recurring contributions grow over time before rebalancing, use the investment calculator. To check whether your overall balance sheet supports your allocation plan, review the net worth calculator. For a simple spending framework that complements allocation targets, see the 50/30/20 rule budget calculator.

Rebalancing formulas

\text{Current \%}_i = \frac{\text{Current Value}_i}{\text{Total Portfolio Value}} \times 100

\text{Trade Amount}_i = \left(\frac{\text{Target \%}_i}{100} \times \text{Total Portfolio Value}\right) - \text{Current Value}_i

Drift equals current percentage minus target percentage. A positive trade amount means buy; a negative amount means sell.

Worked example

A $1,000,000 portfolio holds $700,000 in equity (70%), $200,000 in debt (20%), and $100,000 in gold (10%). Targets are 60%, 30%, and 10%. Equity drift is +10%, so sell $100,000 of equity. Debt drift is -10%, so buy $100,000 of debt. Gold is on track at 10%.

Practical rebalancing tips

Rebalance on a calendar schedule (quarterly or annually) or when drift exceeds a threshold such as 5 percentage points.
Use new cash contributions to buy underweight assets and reduce taxable sales.
Consider tax lots and transaction costs before executing large trades in taxable accounts.

Frequently asked questions

How often should I rebalance?

Many investors rebalance once or twice per year, or when any asset class drifts more than 5 percentage points from target. Frequent rebalancing increases trading costs without guaranteed benefit.

What if my target percentages do not add to 100%?

Target weights must sum to 100% for meaningful results. Adjust your targets until they total 100% before reading buy and sell amounts.

Does new cash change the trade amounts?

Yes. New cash increases total portfolio value, which changes both current percentages and target dollar amounts. The calculator includes new cash in the total before computing trades.

Should I rebalance in retirement accounts differently?

Tax-advantaged accounts avoid immediate capital gains tax on sales, so rebalancing trades are often easier there. Many investors rebalance taxable accounts by directing new contributions first.

Are the results stored on a server?

No. All math runs in your browser. Use Reset to return to the default three-asset example.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.