Portfolio Rebalancer
Back to target weights in one pass
| Symbol | Current $ | Now | Target % | Target $ | Drift | Trade | |
|---|---|---|---|---|---|---|---|
| 50.0% | $30,000 | -10.0pp | +$5,000 | ||||
| 20.0% | $10,000 | +0.0pp | $0 | ||||
| 30.0% | $10,000 | +10.0pp | -$5,000 |
How Rebalancing Works
Rebalancing restores the allocation you actually chose. The portfolio total is the sum of every holding, each position's target value is that total multiplied by its target weight, and the trade is simply the target value minus what you own today. Drift is the gap between the weight you hold and the weight you want, in percentage points.
| Symbol | Current | Weight | Target $ | Drift | Trade |
|---|---|---|---|---|---|
| VTI | $25,000 | 50.0% | $30,000 | -10.0pp | +$5,000 |
| VXUS | $10,000 | 20.0% | $10,000 | +0.0pp | $0 |
| BND | $15,000 | 30.0% | $10,000 | +10.0pp | -$5,000 |
On these defaults the portfolio totals $50,000. VTI should hold $30,000 but only holds $25,000, so that difference is bought, while BND sits above its target and funds it. Total to buy is $5,000 and total to sell is $5,000, which always balance when the weights total 100%.
Trades are sized from the whole portfolio, so buys and sells offset: when the weights total 100%, everything sold is bought elsewhere and no new cash is required. Weights that do not total 100% are flagged under the result until you fix them, because a target of 105% cannot be satisfied. And rebalancing has consequences outside this table — sales inside a taxable account realise gains, and frequent trading adds costs — so many investors rebalance on a schedule or when drift crosses a threshold rather than on every price move.
Frequently Asked Questions
How often should I rebalance my portfolio?
Two reliable approaches work: rebalance on a fixed schedule (once or twice a year) or whenever an asset class drifts about 5 percentage points from its target. Calendar rebalancing is simple and keeps you disciplined; threshold rebalancing reacts only when risk actually drifts. Pick one and apply it consistently.
Does rebalancing trigger taxes?
In taxable accounts, selling winners to rebalance realizes capital gains, which may be taxed. You can minimize the hit by rebalancing inside IRAs first, directing new contributions to the underweight assets, or selling lots with the smallest gains. In tax-deferred accounts, taxes are not a concern.
Can I rebalance by adjusting contributions instead of selling?
Often yes, and it is usually the cheapest route. Direct new deposits to the asset that is underweight until the mix returns to target. This avoids selling (and any gains or commissions) entirely. Large drifts or irregular contributions may still require an outright trade to get back in line.
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Data Sources & Citations
- OfficialInternal Revenue Service (IRS)
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