Find the exact buys and sells to bring your portfolio back to its target allocation — no spreadsheet needed.
Enter your current stocks, bonds, cash, and international holdings, set your target percentages, and see the precise trade list to rebalance — plus the drift on each asset class.
Direct answers to the most common questions, in plain language. Skim if you're in a hurry; dig deeper below.
Selling overweight assets and buying underweight ones to hit your target mix.
Rebalancing is the process of restoring your portfolio to its original target allocation after market moves push it out of line. If stocks rally and grow from 60% to 70% of your portfolio, you sell some stocks and buy bonds to get back to 60/40. It keeps your risk in check.
Annually, or when any asset drifts 5 percentage points past target.
Most studies show that rebalancing once a year, or whenever an asset class drifts 5 percentage points away from its target (the 5/25 rule), captures nearly all the benefit. More frequent rebalancing adds taxes and trading costs without improving long-term returns.
Rebalance when an asset drifts 5 pp absolute or 25% relative from target.
Coined by Larry Swedroe, the 5/25 rule says rebalance whenever a major asset class is off by 5 percentage points in absolute terms (e.g., target 60% stocks, now 65%) or by 25% in relative terms for smaller positions (e.g., target 4%, now 5%+).
Use new contributions and dividends first to avoid capital gains.
In a taxable brokerage, every sell can trigger capital gains tax. Direct new contributions and dividends into your underweight asset classes first — this rebalances without selling. Save the actual buy/sell rebalancing for tax-advantaged accounts (401(k), IRA) wherever possible.
The mechanics in short answers — no jargon, no upsell.
The calculator sums your stocks, bonds, cash, and international holdings to get your total portfolio value. Every percentage is computed against that total.
For each asset class: target value = total portfolio × target percentage. That is the dollar amount each bucket should hold after the rebalance.
Drift is the difference between your current percentage and your target percentage. The asset with the largest absolute drift is your biggest mover.
Trade size = target value − current value. Positive means buy that amount, negative means sell. The total buys and sells always net to zero.
Designed so anyone can model their situation in under a minute, with or without a finance background.
A 60/40 portfolio that drifts to 75/25 is a different portfolio. Rebalancing keeps the risk profile you actually chose.
Rebalancing is a built-in discipline to trim winners and add to laggards — the opposite of chasing performance.
No spreadsheets. Get the precise buy or sell amount for each asset class in seconds.
A rules-based rebalance removes the temptation to time the market or sit on a runaway winner.
See the largest underweight or overweight position highlighted so you know exactly where to act.
Pair the trade list with new contributions and tax-loss harvesting to minimize the bill.
Everything you might ask before, during, or after using this tool.
Either calendar-based (once or twice a year) or threshold-based (when any asset drifts 5 percentage points past target). Both approaches capture nearly all the benefit. Quarterly or monthly rebalancing adds taxes and friction without measurably improving returns over 20-year horizons.
Threshold rebalancing (5/25 rule) typically captures slightly more of the rebalancing premium because it acts on actual market moves rather than the calendar. The downside is you need to check more often. A hybrid — check annually, also rebalance whenever any asset is off by 5 pp — is what most professionals use.
Rebalance whenever any major asset class deviates by 5 percentage points in absolute terms from its target, or by 25% in relative terms for smaller positions. Example: a 60% stocks target triggers at 55% or 65%; a 4% emerging-markets target triggers at 3% or 5%.
Direct all new contributions, dividends, and interest into underweight asset classes first. This is called "rebalancing with new money" and avoids selling anything. Do the rest of the rebalancing inside tax-advantaged accounts (IRA, 401(k), HSA) where buys and sells have no immediate tax impact.
Asset location is the practice of holding tax-inefficient assets (bonds, REITs) in tax-advantaged accounts and tax-efficient assets (broad stock index funds) in taxable accounts. Doing this makes rebalancing easier because the assets you sell most often (bonds) are inside accounts where selling is tax-free.
A wash sale happens when you sell a security at a loss and buy a substantially identical one within 30 days before or after. Pure rebalancing usually involves selling winners (capital gains, not losses), so wash sales rarely apply. They become relevant if you pair rebalancing with tax-loss harvesting.
It is mainly a risk-control tool, not a return-boosting one. Over very long periods, rebalancing between volatile uncorrelated assets can add a small "rebalancing bonus" (0.1–0.5% annually). The bigger benefit is staying invested with a risk level you can actually live through.
Yes — that is when rebalancing does its most important work. In a down market, your stock allocation drops below target. Rebalancing means buying stocks at lower prices using bond proceeds. It feels uncomfortable, which is exactly why a rules-based approach helps.
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A portfolio is not a set-and-forget object. Markets move, and they move different assets by different amounts. A 60/40 portfolio in 2009 became a 75/25 portfolio by 2021 if left alone — the same name, but a much riskier portfolio than what you signed up for.
Rebalancing is the act of pulling the mix back to its target. The point is not to make more money. The point is to keep your risk where you decided it should be, so you don't panic-sell during the next downturn.
Calendar rebalancing means picking a date — your birthday, the start of the year, the end of each quarter — and adjusting the portfolio to target on that day. It is simple, automatic, and easy to delegate.
Threshold rebalancing means watching for drift and only acting when an asset class strays 5 percentage points (or 25% relative for smaller positions) from target. It is more responsive but requires checking in regularly. The 5/25 rule, coined by Larry Swedroe, is the most popular threshold framework.
Studies from Vanguard and Morningstar both find that annual calendar rebalancing or 5 pp threshold rebalancing produce nearly identical 20-year outcomes. The worst choice is rebalancing too often and paying taxes for no benefit.
In a 401(k) or IRA, you can sell and buy freely — there is no tax friction. In a taxable brokerage, every sell of an appreciated asset triggers capital gains. So the first rule of taxable rebalancing is: don't sell unless you have to.
Instead, use new contributions and dividends to rebalance. If your stocks are 5 pp overweight, direct your next several months of 401(k) match, IRA contributions, and reinvested dividends into bonds until the gap closes.
When you do have to sell, prefer lots with long-term holdings (over a year) and the highest cost basis (smallest gain). Many brokers let you specify the lot at the time of sale. And consider pairing the sale with a tax-loss harvest elsewhere in the portfolio to offset gains.
The wash-sale rule disallows a capital loss if you buy a "substantially identical" security within 30 days before or after the sale. It mostly matters when you are tax-loss harvesting, but it can interact with rebalancing.
Example: you sell VTI (Vanguard Total Stock Market) at a loss to harvest it, then your rebalancing plan says to buy stocks the next week. If you buy VTI back inside 30 days, the loss is wash-saled. Buy a non-identical fund (say SCHB or ITOT) instead, and the loss survives.
Asset location is choosing which account holds which asset, based on tax efficiency. Tax-inefficient assets (taxable bonds, REITs, actively-managed funds) go inside tax-advantaged accounts. Tax-efficient assets (broad-market index funds, ETFs) live in taxable accounts.
When you set this up well, the assets you rebalance most often (bonds, which fluctuate against stocks) live where there is no tax friction. The assets that rarely move (broad stock index) sit in taxable accounts and almost never need to be sold. Rebalancing becomes nearly free.
For most investors, the order goes: tax-free Roth IRA for highest-expected-return assets (small-cap, emerging-markets stocks), tax-deferred 401(k) for bonds and REITs, and taxable brokerage for broad stock index funds.
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