The mix you chose five years ago is not the mix you own today — the part that grew now takes a bigger share of the pot. This rebalancing calculator shows how far you have drifted, the dollars it takes to get back to target, and whether your own band rule would trigger an action.
How to read it: the drift is how many percentage points the leg is away from target. The dollars to move is the amount that takes you back to the target — by selling some of the leg that grew, buying the one that lagged, or simply directing new money to the lagging side instead of selling anything.
Nothing has to go wrong for a portfolio to leave its target. If one leg returns more than the other, its share of the total rises — mechanically, every year. In the example above a 60% target has become 72%, which means the portfolio is carrying more risk than the plan called for: the next drawdown now lands on a bigger position. Rebalancing is simply the arithmetic of undoing that, and it is the one part of portfolio work where the action is fully specified by your own numbers — no forecast required.
Not reliably — and it is worth being blunt about that, because “rebalancing bonus” gets quoted as if it were a law. Rebalancing does two measurable things:
Our guide on rebalancing covers the mechanism — including how index funds rebalance inside the fund, which is a different event from you rebalancing your account.
These get used interchangeably and should not be. Rebalancing returns you to the target you already had: same mix, less drift. Reallocation changes the target itself — a different mix, usually because your plan changed (horizon, income needs, risk appetite), not because prices moved. If your answer to “should I change my mix?” is yes, that is reallocation, and the calculator above cannot decide it for you.
Two common rules, and both are legitimate: calendar (check once a year, or every six months) and band (act only when a leg drifts past a threshold). Bands mean fewer actions and a slightly wider drift; a calendar means you never look at a number you did not expect. The one thing that matters more than the choice is writing it down in advance, so the decision is not made in the middle of a drawdown.
It takes your target mix and what you hold now, then shows the drift in percentage points and the dollars you would move to get back to target. With a band set, it also tells you whether your own rule says “act” or “leave it”.
Not reliably. It mainly controls the risk you are carrying after one leg has run ahead; the effect on return depends on how the two legs behave afterwards. Treat any promised “rebalancing bonus” as a special case rather than a rule.
Rebalancing goes back to the target you already set. Reallocation changes the target. One reacts to prices; the other is a change of plan.
No single right answer. Calendar (yearly) and band (only past a threshold like 5 points) are both common. Bands mean fewer actions; calendars mean fewer surprises. Write the rule down before you need it.
No. Directing new contributions to the lagging leg, or taking withdrawals from the leading leg, rebalances the same arithmetic without a sale — which matters if your account is taxable, since a sale can realise a gain. We do not give tax advice; the mechanism is in our ETF vs mutual fund guide.
More: Guide: rebalancing (and how index funds do it) · Dividend reinvestment calculator · Drawdown recovery calculator · All tools