Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A portfolio drifts from its target allocation just by sitting still, because different holdings grow at different rates: a strong year for stocks alone can push an intended 60/40 split to 70/30 without a single trade being made. Rebalancing isn't correcting a mistake; it's undoing the natural effect of unequal growth across positions.
Before you rely on it
What to check
Recalculate the actual current weights before trading, using today's values, not the weights from whenever the portfolio was last set up.
The common error
Where people go wrong with portfolio rebalancing calculator
Assuming an allocation stays where it was set unless actively changed. It drifts continuously with market movement, and checking it only when something feels off usually means the drift has already gone further than expected.
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
Total portfolio value is the sum of everything in the plan, including cash. Current holding value is the value of the one asset or asset class you are rebalancing, and target allocation is the percentage you decided it should be. Use the same date for every value. Choose target weights from a written investment plan that reflects your time horizon and risk tolerance, not from recent performance.
When the result stops applying
In a taxable account, selling winners triggers capital gains tax, so rebalancing with new deposits or inside retirement accounts is cheaper. The result covers one holding and its opposite side, so a full rebalance across many assets needs each one checked. Transaction fees and bid-ask spreads also count for small positions.
What to compare it with
For a quick view of drift across the portfolio, the asset allocation drift calculator compares current and target weights. The portfolio weighted return and two-asset risk pages show how allocation changes expected return and volatility. Write down your rebalancing rule in advance, since deciding in the middle of a market swing is when investors make mistakes.
People also ask
Frequently asked questions
How often should I rebalance?
Common approaches are once a year or when an asset drifts about five percentage points from its target. Research finds little difference between reasonable schedules, so pick one and stick to it.
Does rebalancing raise returns?
Not reliably. It mainly keeps risk at the level you chose, because letting winners run leaves the portfolio riskier than planned.
How can I rebalance without paying tax?
Direct new contributions to the underweight asset, rebalance inside an IRA or 401(k), or use dividends, all of which avoid selling appreciated holdings in a taxable account.