Portfolio rebalancing calculator
The buy and sell amounts that bring each holding back to its target weight, using new money first where possible.
Buy into holding 2
$4,500.00
largest single move; portfolio has drifted 2.4 points from target
- Portfolio value
- $186,000
- New money to place
- $6,000.00
- Largest drift
- 2.42%
| Holding 1 — target 55% | $4,300.00 |
|---|---|
| Holding 2 — target 25% | $4,500.00 |
| Holding 3 — target 12% | -$3,680.00 |
| Holding 4 — target 8% | $880.00 |
- Directing new money at the underweight holdings rebalances without selling, which avoids a taxable event.
With $6,000 of new money, most of the drift here can be corrected without selling anything and without triggering a taxable gain.
Side by side
How this is calculated
Target values first, trades second
Each target percentage is applied to the total portfolio including the new money, then the current value is subtracted. The target values are allocated so they sum to the portfolio exactly rather than each being rounded separately.
trade = total × target% − current valueNew money before selling
Directing contributions at the underweight holdings rebalances without a disposal. In a taxable account that difference is the whole game: selling $20,000 of a holding with a 40% gain can cost thousands in tax to correct a drift of a few points.
Worked example: Four holdings worth $180,000, with $6,000 to invest
| Holdings | $98k / $42k / $26k / $14k |
|---|---|
| Targets | 55 / 25 / 12 / 8 |
| New money | $6,000 |
| Largest move | into the most underweight holding |
|---|---|
| Portfolio after | $186,000 |
The equity holding has drifted above target because it rose — rebalancing means selling what worked, which is why it is unpopular and why it works.
What this assumes
- Prices are current market values.
- Trading costs are excluded.
- No tax is applied to disposals.
- Fractional units can be bought.
Where this commonly goes wrong
- Rebalancing in a taxable account realises capital gains — the tax can exceed the benefit for a drift under about five points.
- Rebalancing too often, monthly rather than annually, adds cost and turnover without improving the risk profile.
- Holding the same index through two different funds looks like diversification in a table and is not.
Questions
How often should I rebalance?
Once a year, or when a holding drifts more than about five percentage points from target — whichever comes first. Both rules perform similarly in the research, and both beat rebalancing on a whim.
Should I sell or use new contributions?
Use contributions wherever they are large enough. Directing new money at the underweight holdings corrects drift with no disposal, no trading cost and no capital gains event.
Does rebalancing improve returns?
Usually not directly. Its job is to keep the risk profile where you chose it: without rebalancing, a portfolio drifts toward whatever has run hardest, which is exactly the wrong exposure going into a fall.
What about rebalancing inside a retirement account?
Far easier, because disposals inside most retirement wrappers are not taxable events. If you hold the same allocation in both taxable and retirement accounts, do the rebalancing trades in the retirement one.
Is a 5% band the right threshold?
It is a common default. A tighter band means more trades for little benefit; a wider one lets the risk profile drift further than you intended. Five points on a 55% holding means acting at 50% or 60%.
Should I rebalance during a crash?
That is when it matters most and when it is hardest — it means buying the thing that just fell. If you cannot do it by hand, an automatic annual rebalance date removes the decision from the moment.
Related tools
Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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