Portfolio Rebalancing Calculator

Portfolio rebalancing is the process of realigning the weightings of assets in a portfolio to match a target allocation that has drifted due to different rates of return across asset classes. Left unchecked, a portfolio’s actual risk profile diverges from the investor’s intended risk profile.

Drift calculation:

Current Weight (%) = Asset Value ÷ Total Portfolio Value × 100

Drift = Current Weight − Target Weight

Rebalancing trade calculation:

Target Asset Value = Total Portfolio Value × Target Weight

Trade Amount = Target Asset Value − Current Asset Value

Positive means buy to reach the target; negative means sell the excess.

Worked example: Portfolio: $200,000 total. Target: 60% stocks / 30% bonds / 10% cash

After a strong stock rally:

Rebalancing trades:

• Stocks: ($200,000 × 60%) − $136,000 = $120,000 − $136,000 = sell $16,000
• Bonds: $60,000 − $54,000 = buy $6,000
• Cash: $20,000 − $10,000 = add $10,000

The sells and the buys match at $16,000, which is the check worth doing every time. A rebalance moves money between sleeves, it does not add or remove any, so if the two columns do not tie out then one of the target percentages is wrong.

Rebalancing strategies:

• Calendar rebalancing rebalances quarterly or annually regardless of drift
• Threshold rebalancing only trades when an asset drifts beyond a set band, commonly 5 percentage points, which cuts the number of taxable events sharply
• Band rebalancing keeps each sleeve inside a stated range, so a 60% stock target with a 5-point band means stocks must stay between 55% and 65%

Set the optional drift threshold field and the calculator tells you which sleeves have actually broken their band, rather than listing a trade for every one of them. Vanguard’s own research on this found annual checking with a 5-point band captured almost all of the benefit of daily monitoring, at a fraction of the trading.

Tax efficiency tips:

• In taxable accounts, rebalance by directing new contributions to underweight assets rather than selling
• Use tax-advantaged accounts (IRA, 401k) for rebalancing trades to avoid capital gains taxes
• Harvest losses in the overweight assets if they have unrealized losses