Portfolio Rebalancing Calculator

What is Rebalancing?

Rebalancing is the process of realigning your portfolio allocations back to your target asset mix. As markets move, some assets grow faster than others, causing your portfolio to drift from its intended allocation.

Why Rebalance?

• Risk Management: Prevents overexposure to any single asset class
• Discipline: Forces you to sell high and buy low
• Goal Alignment: Keeps portfolio matched to your risk tolerance

Rebalancing Methods

• Calendar-based: Rebalance quarterly, semi-annually, or annually
• Threshold-based: Rebalance when drift exceeds 5% or 10%
• Cash flow: Direct new investments to underweight assets

Common Target Allocations

• Aggressive (80/20): 80% stocks, 20% bonds
• Moderate (60/40): 60% stocks, 40% bonds
• Conservative (40/60): 40% stocks, 60% bonds

Tax Considerations

• Rebalancing in taxable accounts may trigger capital gains
• Consider rebalancing within tax-advantaged accounts first
• Use new contributions to rebalance when possible
• Tax-loss harvesting can offset rebalancing gains

Best Practices

• Set a rebalancing threshold (5% drift is common)
• Dont over-rebalance (trading costs add up)
• Use dividends and contributions to rebalance
• Review allocations at least annually