Portfolio Rebalancing Calculator

Nobody chooses an 80% stock portfolio by accident in a single day. They choose 60%, markets move, and a few years later the portfolio they actually own is a different, riskier one than the portfolio they picked. Investor.gov, the SEC's investor site, uses almost exactly that example: a stock allocation set at 60% can reach 80% after a strong market run, at which point the investor is carrying equity risk they never signed up for, and a market fall lands on a much larger share of their savings than planned. Rebalancing is the correction: returning each category to its target share, on purpose, before the drift makes the decision for you.

The arithmetic is simple enough that the real questions are procedural. Should you sell the overweight holding, or steer new money to the underweight ones? How far out of line justifies acting at all, given that trading can cost fees and, in a taxable account, realize capital gains? This calculator answers the arithmetic half completely: the exact trades for a full rebalance, and the exact placement of any new cash for the no-sale route, including an honest statement of how far the no-sale route gets when the cash is not enough to finish the job.

Investor.gov lists three ways to rebalance, and the right one is usually decided by cost rather than by math, since all three aim at the same target mix. Sell and buy: sell the overweight categories and use the proceeds to buy the underweight ones. This finishes the job in one step, at any drift size, and is the only route that can. Its costs are transaction fees where they apply and, in a taxable account, capital gains realized on the sales. Buy with new money: direct savings, dividends, or a windfall at the underweight side, as the buy-only plan on this page lays out. No sales, no realized gains, but the correction is limited by how much cash is arriving relative to the drift. Redirect contributions: if you invest every month, point the whole contribution at the underweight holdings until the mix restores itself. The slowest route, and for a portfolio with regular contributions often the only one ever needed, because the drift of a few points is smaller than a year of contributions aimed deliberately.

Whichever route you use, Investor.gov's caution applies before the trade, not after: check whether the method you chose triggers fees or tax consequences, and weigh them against the size of the drift you are correcting. Rebalancing a portfolio that is one point out of line, at the cost of a taxable sale, is precision purchased too dearly. A portfolio ten points out of line is a different risk position than the one you chose, and correcting it is worth a modest cost.

Aggregate before you enter. The four rows are categories, not individual funds: if three accounts each hold a US stock fund, their combined value is the US stocks row, because the allocation you chose describes the whole portfolio, not each account separately. Work out where rebalancing is cheapest first: sales inside tax-advantaged accounts realize no tax, so a portfolio can often be corrected almost entirely inside one account while the others are left untouched. Set your rule in advance, on the calendar or on a drift threshold such as five percentage points, and then let the rule, not the headlines, tell you when to open this page.