Portfolio Rebalancing Calculator
Maintain optimal asset allocation by calculating when and how to rebalance your investment portfolio with tax considerations
Trigger alert when allocation deviates by this %
New money to invest
For selling assets
Rebalancing Needed
One or more assets exceed threshold
Your portfolio has drifted 5% from target allocation
Rebalance annually or when deviation exceeds 5% to maintain optimal allocation
Frequently Asked Questions
Rebalancing maintains your target asset allocation by bringing your portfolio back to its original mix. Over time, some investments grow faster than others, causing your allocation to drift from your goals. Regular rebalancing helps manage risk and ensures your portfolio aligns with your investment strategy.
Most investors rebalance annually or semi-annually. However, threshold-based rebalancing (like 5-10% deviation) can be more effective. Avoid over-rebalancing as it increases transaction costs and tax implications. Consider rebalancing when adding new investments to minimize tax impact.
A threshold of 5-10% deviation is common. Smaller thresholds (5%) lead to more frequent rebalancing and tighter allocation control but higher costs. Larger thresholds (10%) reduce trading frequency but allow more drift. Choose based on your portfolio size, risk tolerance, and transaction costs.
Strategies include: (1) Use new contributions to buy underweight assets instead of selling, (2) Harvest tax losses by selling losing positions first, (3) Rebalance in tax-advantaged accounts where possible, (4) Hold assets over 1 year to qualify for long-term capital gains rates, (5) Consider tax-loss harvesting opportunities while maintaining allocation targets.