Stock Portfolio Rebalance Analyzer
Analyze portfolio drift and rebalancing needs. Enter values for instant results with step-by-step formulas.
Formula
Drift = Current % - Target %; Rebalance = (Target - Current) × Portfolio Value
Worked Examples
Example 1: Moderate Drift - Rebalance Needed
Problem:Portfolio: $500K total. Target: 60% stocks, 30% bonds, 10% cash. Current: 70% stocks, 23% bonds, 7% cash. Rebalance?
Solution:Current allocation:\nStocks: 70% ($350,000)\nBonds: 23% ($115,000)\nCash: 7% ($35,000)\n\nTarget allocation:\nStocks: 60% ($300,000)\nBonds: 30% ($150,000)\nCash: 10% ($50,000)\n\nDrift analysis:\nStocks: +10% (overweight by $50,000)\nBonds: -7% (underweight by $35,000)\nCash: -3% (underweight by $15,000)\n\nMax drift: 10% (stocks) → Exceeds 5% threshold!\n\nRebalancing trades:\nSell $50,000 stocks\nBuy $35,000 bonds\nAdd $15,000 cash (or buy bonds)\n\nTax consideration (taxable account):\n$50K sale may trigger capital gains\nIf cost basis is $40K, gain = $10K\nTax (20% LTCG): $2,000\n\nNet rebalance: $50K stocks → $35K bonds + $15K cash - $2K tax\n\nIn IRA: no tax, simpler decision
Result:Rebalance needed | Max drift: 10% | Sell $50K stocks, buy $35K bonds, $15K cash
Example 2: Minor Drift - No Action
Problem:$100K portfolio. Target: 50/40/10 stocks/bonds/cash. Current: 53/38/9. Rebalance?
Solution:Current:\nStocks: 53% ($53,000)\nBonds: 38% ($38,000)\nCash: 9% ($9,000)\n\nTarget:\nStocks: 50% ($50,000)\nBonds: 40% ($40,000)\nCash: 10% ($10,000)\n\nDrift:\nStocks: +3% ($3,000 over)\nBonds: -2% ($2,000 under)\nCash: -1% ($1,000 under)\n\nMax drift: 3%\n\nThis is well within 5% threshold.\n\nRecommendation:\nNo action needed.\nMonitor drift in next quarterly review.\n\nIf making regular contributions:\nPut next contributions into bonds (underweight)\nThis gradually rebalances without selling\n\nAvoid trading for 3% drift—costs exceed benefits.
Result:No rebalance needed | Max drift only 3% | Monitor quarterly | Use contributions to drift back
Example 3: Post-Bull Market Rebalance
Problem:$1M portfolio after stocks +40% year. Target 70/25/5. Now 80/17/3 due to stock gains. Taxable account with $200K unrealized gains.
Solution:Current (post-gains):\nStocks: 80% ($800,000)\nBonds: 17% ($170,000)\nCash: 3% ($30,000)\n\nTarget:\nStocks: 70% ($700,000)\nBonds: 25% ($250,000)\nCash: 5% ($50,000)\n\nDrift:\nStocks: +10% (+$100,000 overweight)\nBonds: -8% (-$80,000 underweight)\nCash: -2% (-$20,000 underweight)\n\nMax drift: 10% → Rebalance needed\n\nBut taxable account consideration:\nSelling $100K stocks\nCost basis ~$600K for current $800K stocks\nGains: $200K total, proportional sale = $25K gains\nTax: $25,000 × 20% = $5,000\n\nAfter-tax rebalance:\nSell $100K stocks → $95K after tax\nBuy $80K bonds + $15K cash\n\nAlternative:\nWait for pullback (stocks decline, auto-rebalancing)\nUse contributions to bonds over next 12-24 months\nTax-loss harvest in next downturn\n\nDecision: Unless urgently need rebalance, use co
Result:10% drift (stocks overweight) | Rebalancing costs $5K tax | Alternative: use contributions over time
Frequently Asked Questions
What is portfolio rebalancing?
Rebalancing restores portfolio to target asset allocation. Over time, stocks outperform bonds, shifting 60/40 portfolio to 70/30. Rebalancing sells winners (stocks) and buys losers (bonds) to return to 60/40. This enforces 'buy low, sell high' discipline and manages risk by preventing overconcentration.
How often should I rebalance?
Common approaches: Calendar (annually, quarterly), Threshold (when any asset drifts 5-10% from target), Hybrid (annual review, plus threshold). Research shows annual rebalancing performs similarly to quarterly with less trading costs. Monthly is likely over-trading. Set threshold (5-10% drift) for emergency rebalance between calendar reviews.
Should I rebalance in taxable or retirement accounts?
Prioritize tax-advantaged accounts (IRA, 401k) for rebalancing—no tax on trades. For taxable accounts: consider tax-loss harvesting (sell losers to offset gains), use new contributions to rebalance (rather than selling), tolerate wider bands before triggering taxable sales. Taxes can be 15-20% of rebalanced amount.
How do I rebalance with contributions?
Most efficient rebalancing: use new contributions to buy underweight assets. Example: portfolio is 70% stocks (target 60%). Put next 6 months of contributions into bonds. This rebalances without selling (no taxes, no trading costs). Requires patience but very tax-efficient.