Transparent method
The formula
Worked example
Example inputs
How to interpret the result
The single holding with the largest gap between its current weight and its target weight is the one actually driving a portfolio's overall drift, even when several holdings have shifted somewhat. Rebalancing effort is best spent closing that largest gap first rather than nudging every position by a small amount.
Before you rely on it
What to check
Identify the single largest target-weight gap specifically, rather than treating every position's small deviation as equally worth acting on.
The common error
Where people go wrong with asset allocation drift calculator
Rebalancing every position by a small amount rather than focusing on the one holding with the largest actual drift. Spreading limited rebalancing effort evenly across small gaps addresses less real risk than closing the largest one.
Sensitivity evidence
How total portfolio value changes the buy or sell amount
| Total portfolio value | Buy or sell amount | Current allocation |
|---|---|---|
| $200,000 | -$10,000 | 35.0% |
| $225,000 | -$2,500 | 31.1% |
| $250,000worked example | $5,000 | 28.0% |
| $275,000 | $12,500 | 25.5% |
| $300,000 | $20,000 | 23.3% |
Every input, tested
Which input moves the buy or sell amount most
| Input | Tested from | To | Buy or sell amount at each end | Swing |
|---|---|---|---|---|
| Total portfolio value | $225,000 | $275,000 | -$2,500 to $12,500 | $15,000 (300%) |
| Current holding value | $63,000 | $77,000 | $12,000 to -$2,000 | $14,000 (280%) |
| Target allocation | 28.0% | 32.0% | $0.00 to $10,000 | $10,000 (200%) |
Two variables at once
Buy or sell amount by total portfolio value and current holding value
| Total portfolio value \ Current holding value | $56,000 | $70,000 | $84,000 |
|---|---|---|---|
| $200,000 | $4,000 | -$10,000 | -$24,000 |
| $225,000 | $11,500 | -$2,500 | -$16,500 |
| $250,000 | $19,000 | $5,000 | -$9,000 |
| $275,000 | $26,500 | $12,500 | -$1,500 |
| $300,000 | $34,000 | $20,000 | $6,000 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Total portfolio value | $250,000 |
| Current holding value | $70,000 |
| Target allocation | 30.0% |
| Buy or sell amount | $5,000 |
| Current allocation | 28.0% |
Where the inputs come from
Enter the total value, the current dollar value of the asset class and the target weight from your investment policy. Drift is easiest to see when you use broad classes such as US stocks, international stocks and bonds rather than individual funds. Include every account in the total, since a 401(k), an IRA and a taxable account together form one portfolio.
When the result stops applying
Drift measures weights only, not the risk of the holdings inside them. Two portfolios with equal stock weights can have different risk if the stocks differ. Targets themselves should change as you approach a goal, since a glide path lowers the stock share over time. The tool considers one holding at a time.
What to compare it with
The portfolio rebalancing calculator turns the drift into a trade. For the expected effect of your allocation on return and risk, use the portfolio weighted return and two-asset risk calculators. If you use a target-date fund, its manager rebalances for you, which removes this task.
People also ask
Frequently asked questions
What is allocation drift?
It is the gap between a holding's current share of the portfolio and its target share, caused by different assets earning different returns.
How much drift is too much?
A common trigger is five percentage points, or a quarter of the target weight for a small holding. Smaller drifts are usually not worth the trading cost.
Should my target allocation change over time?
Usually yes. Many investors reduce stock exposure gradually as they near the date they will need the money, a pattern called a glide path.