How Portfolio Rebalancing Works — and When to Do It
Markets move every day, and when they do, your portfolio drifts away from your target allocation. A portfolio that started the year at 60% stocks and 40% bonds might be sitting at 68/32 after a strong equity rally. That drift means you're taking on more risk than you planned for — and missing the diversification benefit you designed into your original allocation.
Rebalancing brings your portfolio back to target. This calculator supports two modes: Buy & Sell mode sells overweight holdings and buys underweight ones, netting trades to zero. Buy Only mode is useful when you have new cash to deploy — it directs money toward underweight holdings without triggering any sells, which avoids realizing capital gains in taxable accounts.
How Often Should You Rebalance?
Most research suggests rebalancing once a year or whenever any holding drifts more than 5 percentage points from its target — whichever comes first. Rebalancing more frequently (monthly or quarterly) adds transaction costs and tax events with minimal improvement. The sweet spot is checking your allocation a few times a year and acting only when the drift is meaningful.
Why Not Just Use Your Broker's Tool?
Most brokerage rebalancing tools only see the assets held at that broker. If you have a 401(k) at Fidelity, an IRA at Vanguard, and a taxable account at Schwab, none of them can see your complete picture. This calculator lets you enter all holdings across all accounts in one place so you get recommendations based on your total portfolio, not just one slice of it.
Here's what the calculator shows you:
- Side-by-side pie charts comparing your current allocation to your target
- Dollar amounts to buy or sell for each holding to reach your target
- Share quantities when you enter share prices (with whole-share or fractional rounding)
- Preset templates for common strategies like the 3-Fund Portfolio or Boglehead Lazy Portfolio
- Spreadsheet import so you can paste holdings directly from a CSV or Google Sheet
To figure out what your target allocation should be based on your retirement timeline, try the Investment Optimizer. To track how your total portfolio grows year over year, use the Net Worth Tracker.