Portfolio Rebalancing Calculator

Your trade list

Holding	Now	Weight	Target	Drift	Trade

Positive figures are buys, negative figures are sells.

How the arithmetic works

Rebalancing is two divisions and a subtraction per holding, and the only reason it feels fiddly is that every number depends on the total.

1. Add every holding together, plus any new cash, to get the portfolio total.
2. Multiply the total by each target weight to get the dollar value that holding should have.
3. Subtract what it is worth now. A positive answer is a buy, a negative answer is a sell.

The default portfolio shows it. US stocks at $68,000, bonds at $26,000 and international stocks at $11,000 come to $105,000. The targets are 60%, 30% and 10%, so the portfolio should hold $63,000, $31,500 and $10,500. Against what is actually there, that means selling $5,000 of US stocks, buying $5,500 of bonds and selling $500 of international stocks. The buys and the sells match, because no new money entered the portfolio.

US stocks had drifted to 64.8% of the portfolio against a 60% target, a drift of 4.8 percentage points. Bonds had fallen to 24.8% against a 30% target. Nothing was bought or sold to make that happen. One asset simply outgrew the other, which is what a good year for stocks always does to a stock and bond allocation.

Rebalancing with new money instead of selling

Switch the method to new money only and the calculator stops selling anything. It ranks the holdings by how far below target they sit in dollars, then splits your new cash across them in proportion to those shortfalls. If the cash covers every shortfall, the remainder is spread across the targets.

The appeal is tax. A sale in a taxable account realizes a capital gain and hands part of it to the IRS, while a purchase costs nothing beyond the spread. Contributions, dividends and interest can do most of the work if you direct them deliberately, which is the cheap version of rebalancing described in portfolio rebalancing and in tax-efficient investing.

Deciding when to act

Two rules are common and both are defensible. A calendar rule rebalances on a fixed date each year, which is simple and easy to keep. A threshold rule rebalances a holding only once it has drifted more than a set amount, commonly five percentage points or one quarter of its target weight, which trades less in calm markets and more in violent ones. Combining them, by checking annually and acting only on breached thresholds, keeps the trade count low.

Whichever you use, write it down before the market gives you a reason to argue with it. Rebalancing asks you to sell the thing that has done well and buy the thing that has not, which is the hardest trade to make on instinct. If you are adding money regularly anyway, the dollar-cost averaging calculator shows what those contributions build on their own, and diversification explained covers what the allocation is supposed to be protecting you from.