Markets pull your mix away from target. See exactly what to buy and sell to get back in line.
Calculates the exact dollar trade needed to move your current stock allocation back to your target, with the offsetting adjustment in bonds.
Over time, gains in one asset class push your portfolio away from its intended mix, often leaving you with more stock risk than planned. Rebalancing sells the overweight portion and buys the underweight one to restore your target allocation. This tool shows the precise dollar amount to trade in stocks and the opposite move in bonds. Keeping your allocation aligned helps control risk and enforces a disciplined buy low, sell high habit.
Rebalancing in a taxable account can trigger capital gains, so many investors rebalance inside tax-advantaged accounts or use new contributions to nudge the mix. Trading may also involve commissions or bid-ask spreads, though these are small at most brokers. Common approaches rebalance on a schedule or when an allocation drifts past a set threshold. This is an educational tool and not financial advice; consider taxes and your full plan before trading.
Many investors rebalance once or twice a year, or whenever an allocation drifts a set amount, such as five percentage points, from target. More frequent trading can raise costs and taxes without much added benefit.
Yes, directing new contributions or dividends toward the underweight asset can shift your mix over time. This avoids selling and the taxes that selling may create in a taxable account.
Its main purpose is controlling risk by keeping your allocation on target, not maximizing returns. In some periods it helps returns and in others it slightly reduces them.
See the exact formula and a worked example on our methodology page.