Quick answer
A portfolio rebalancer converts target percentages into actual orders. A $100,000 portfolio targeting 60% US stocks, 20% international, 15% bonds and 5% cash, holding $48,000 / $18,000 / $24,000 / $10,000, needs four trades: buy $12,000 of US stocks and $2,000 of international, sell $9,000 of bonds and $5,000 of cash — the sells pay for the buys.
How the Portfolio Rebalancer works, step by step
Enter every holding with two numbers: what it is worth now, and what share of the portfolio it should be — up to eight holdings. The targets must add to 100%; the tool shows the running total and flags it in red until it does. It then converts each target percentage into a target value at today's portfolio size and diffs it against reality: that difference, signed, is the trade.
Sells are listed with buys, and because a rebalance only moves money between holdings, the sells always fund the buys to the cent — no new cash is required, which is why the example's $14,000 of buys is matched by $14,000 of sells. The drift figure (the largest gap between a holding's actual and target share) is the number to watch between rebalances, and holdings within $1 of target simply show 'Hold'.
Rebalance on a rule, not a mood. Vanguard's 2010 research on a 60/40 portfolio over 1926–2009 found no meaningful difference in risk-adjusted returns between monthly, quarterly and annual rebalancing — but the number of trades, and their costs, rose sharply with frequency. Its conclusion: check once or twice a year and act only when a holding drifts more than about 5 percentage points from target. Inside the band, trading mostly manufactures spreads, taxes and regret.
The point is risk control, not return. In Vanguard's simulation the never-rebalanced 60/40 drifted to an average 84.1% in equities — at one point about 99% — and returned slightly more, 9.1% a year against 8.6% for the annually rebalanced version, but with volatility of 14.4% against 11.9%. Rebalancing sells what rose and buys what fell, which keeps the portfolio you chose from becoming a different, riskier one after a bull run.
Execute the sells first, then the buys with the proceeds. In taxable accounts, prefer directing new deposits and dividends into the underweight holdings instead of selling, since selling realises capital gains; use the trade list to see how much of each buy a deposit can replace. The tool calls drift under 2 points essentially on target: below that line, the trades cost more than the precision is worth.
The formula
Target value = portfolio total × target %. Trade = target value − current value (positive: buy, negative: sell). Drift = |current % − target %|. Turnover = half the sum of |trades|, because every sale funds a purchase.
Worked example — try it on the calculator above
Worked example: a $100,000 portfolio that drifted in a bull market
Holdings today: US stocks $48,000 (48%), international stocks $18,000 (18%), bonds $24,000 (24%), cash $10,000 (10%). Targets: 60 / 20 / 15 / 5. Target values at $100,000 are $60,000, $20,000, $15,000 and $5,000, so the trade list reads: buy $12,000 of US stocks, buy $2,000 of international, sell $9,000 of bonds, sell $5,000 of cash. Total trading is $14,000 (turnover), the largest drift is the 12-point gap in US stocks, and the plan needs no new money. Note what happened here: stocks fell behind target because bonds and cash were added during the year while stocks were left alone — drift is usually your own deposits, not the market.
Frequently Asked Questions
How often should I rebalance?
Once or twice a year on a fixed date, or whenever a major holding drifts more than about 5 percentage points from target — whichever comes first. Vanguard's 2010 research found risk-adjusted returns barely differ between monthly, quarterly and annual rebalancing, while trading costs rise sharply with frequency. More often than that and you are mostly paying spreads and taxes to fight noise.
Should I rebalance by selling, or with new deposits?
In taxable accounts, prefer directing new deposits (and dividends) into the underweight holdings — it restores the target without realising capital gains. Selling is the tool for retirement accounts, for large drifts deposits cannot fix in reasonable time, and for holdings you should exit anyway. The trade list is the same either way; deposits simply substitute for some of the buys.
What if my targets do not add to 100%?
Then they describe more (or less) than the whole portfolio, and no set of trades can satisfy them. The tool flags the total as you type. The usual cause is adding a new holding without trimming the others — decide what the new position replaces, because in a portfolio everything is funded by something.
Does rebalancing actually improve returns?
Its reliable benefit is risk control: it keeps the portfolio you chose from becoming a different, riskier one after a bull run. In Vanguard's 1926–2009 simulation the never-rebalanced 60/40 returned slightly more (9.1% vs 8.6% a year) — but at 14.4% volatility against 11.9%, and an average 84% in equities. Anyone who sells rebalancing as a return booster is overselling; it is a discipline tool.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.