How to use the calculator
- List your holdings with their value today and the target share of the portfolio you want for each. Group several funds of the same kind into one line (for example all US stock funds). Targets should add up to 100%.
- Enter any new money you are about to invest.
- Choose Buy and sell to bring every holding exactly back to target, or New money only to fix the mix without selling anything.
- Open Advanced to change the rebalancing bands and the tax figures used for the estimate.
Why portfolios drift
Different investments grow at different speeds. After a good year for stocks, a 60/40 stock and bond portfolio may become 68/32 without you doing anything, and carry more risk than you chose. Rebalancing means selling some of what has grown and buying what has lagged, or steering new money to the parts that are underweight.
When to rebalance: the 5/25 rule
Rebalancing too often costs trading fees and taxes; never rebalancing lets risk creep up. A common rule of thumb is to act only when a holding moves outside a band: 5 percentage points from its target, or 25% of its target, whichever is smaller. A 60% target can move between 55% and 65%; a 10% target between 7.5% and 12.5%. The calculator marks every holding outside its band in red.
Example: $100,000 with $5,000 to add
| Holding | Now | Target | Drift | Buy and sell | New money only |
|---|---|---|---|---|---|
| US stocks | $62,000 (62%) | 55% | +7 pts, outside band | Sell $4,250 | – |
| International stocks | $14,000 (14%) | 20% | −6 pts, outside band | Buy $7,000 | Buy $3,784 |
| Bonds | $19,000 (19%) | 20% | −1 pt | Buy $2,000 | Buy $1,081 |
| Cash | $5,000 (5%) | 5% | 0 | Buy $250 | Buy $135 |
With new money only, the $5,000 goes to the three holdings below target in proportion to how far each one is short. It narrows the gaps without a sale, so there is no tax to pay. Selling $4,250 of US stocks in a taxable account, with 40% of the sale being gain taxed at 15%, would cost about $255.
Ways to rebalance
- Direct new money (contributions, dividends) to underweight holdings first. It is free and often enough.
- Rebalance inside tax-advantaged accounts such as an IRA or 401(k), where sales are not taxed.
- Check on a schedule, for example once or twice a year, and trade only what is outside its band.
Common mistakes
- Targets that don’t add up to 100%. The calculator scales them so they do, and shows the total in red until they match.
- Selling winners in a taxable account without checking the tax. Look at the tax estimate, and consider the new-money-only option first.
- Counting the same fund twice. A target-date or balanced fund holds both stocks and bonds; split its value between the lines it covers.
To see how a target mix would have done in the past, with and without regular rebalancing, run it through the portfolio backtest calculator.
Frequently asked questions
What is portfolio rebalancing?
Bringing the mix of your investments back to the target you chose, for example 60% stocks and 40% bonds, by selling what has grown above its share and buying what has fallen below it, or by putting new money into the parts that are short.
How often should I rebalance?
Common approaches are once or twice a year, or only when a holding drifts outside a band such as the 5/25 rule. Checking more often than that mostly adds trading costs and taxes.
What is the 5/25 rule?
Rebalance a holding when it moves more than 5 percentage points from its target or more than 25% of its target, whichever is smaller. A 40% target can range from 35% to 45%; an 8% target from 6% to 10%.
Can I rebalance without selling?
Yes. Choose "New money only": the calculator sends new contributions to the holdings below target, in proportion to how far each is short. It may take a few contributions to reach the target, but there is no sale and no tax.
Do I pay tax when I rebalance?
Selling at a gain in a taxable account usually means capital gains tax. Sales inside an IRA, 401(k) or similar account are generally not taxed. The calculator's tax figure is a rough estimate: sales × share that is gain × your tax rate.
What should my target allocation be?
It depends on your goals, time horizon and how much risk you can live with. The calculator doesn't choose one for you; it helps you stick to the mix you picked.
Can I put this calculator on my website?
Yes. It is free for any site. Use the embed code generator at the bottom of this page, copy the code and paste it into your page. Please keep the credit line with the two links under the calculator.
Related calculators
- Portfolio Backtest CalculatorHow a mix of up to 10 stocks and ETFs would have done: return, volatility and worst drawdown.
- DCA vs Lump Sum CalculatorInvesting all at once versus spreading it out, in steady, crash and volatile markets.
- Dividend Income CalculatorYearly and monthly dividend income from your stocks and ETFs, with a month-by-month calendar.
- Bond Yield to Maturity CalculatorYield to maturity, current yield, yield to call and duration from a bond’s price, coupon and maturity.
See all free investing calculators, or add live stock quotes to your site with the free stock widgets.
Add this calculator to your website
The calculator is free to embed on any website, personal or commercial, and works on WordPress, Blogger, Wix, Squarespace, Webflow, Ghost and plain HTML. Choose the options, copy the code and paste it into your page.
Preview: this is how the calculator and the credit line will look on your page
Free for personal and commercial websites. Please keep the “by Quotelinks” credit line under the calculator visible and unchanged, and don’t modify the calculator or present it as your own. The <script> line is optional: it sizes the frame to fit the calculator; if your platform removes scripts, the calculator still works at the fixed height. The tax figure is a rough estimate. Results are for illustration only, not financial or tax advice.