Portfolio rebalancing calculator

When and how to rebalance

Rebalancing means trading your portfolio back toward the target weights you chose, after prices have pushed it somewhere you didn’t. The reason to bother isn’t chasing return — it’s controlling risk. Leave it alone and your best performer quietly becomes your biggest position, so a portfolio you built to be balanced ends up making one concentrated bet you never actually decided to make. Rebalancing is how you keep your risk where you set it.

Calendar vs. threshold bands

There are two common triggers. Calendar rebalancing trades on a fixed schedule — every quarter, or once a year — regardless of how far anything has moved. It’s simple and disciplined, but it’s also arbitrary: it makes you trade when nothing has drifted, and it can ignore a position that ran away between dates. Threshold (band) rebalancing ignores the calendar and trades a holding only when it drifts past a set band around its target. You do nothing while things wobble inside the band, and act only when drift is real.

The most-used band is the 5/25 rule: rebalance a holding when it’s off its target by more than 5 absolute percentage points or by more than 25% of its target weight — whichever is the smaller move. The two tests do different jobs. The 5-point absolute band governs your big positions: a 50% target only breaches at 55% or 45%. The 25% relative band governs your small ones: a 4% sleeve has a band of just one point (25% of 4%), so it flags the moment it hits 5% or 3% — before a small satellite position can silently double into something that matters. This calculator flags every holding that breaches its 5/25 band so you can see, at a glance, which ones actually need attention.

Why bands often beat the calendar

Threshold rebalancing tends to win on both cost and responsiveness. It trades less often, because it does nothing while drift stays inside the band — fewer trades means fewer commissions, spreads and, in a taxable account, fewer taxable events. And it’s more responsive when it counts: if a position blows through its band a week after your last calendar check, a band strategy catches it instead of waiting months for the next scheduled date. Many investors get the best of both by reviewing on a calendar — a quick quarterly look — but only trading the holdings that have actually breached their band.

The tax-aware, no-sell approach

In a taxable account, a full rebalance has a hidden cost: selling your overweight winners realizes capital gains and hands you a tax bill. The new-cash-only mode above avoids that entirely. Instead of selling anything, it takes fresh money — a paycheck contribution, a dividend, a bonus — and routes it to your most underweight holdings first, buying you back toward target from below. You won’t always reach the exact targets with one deposit, but you move the right direction while realizing zero gains. For most people, steering ongoing contributions this way keeps a taxable portfolio in line for years without ever forcing a taxable sale. Reserve full sell-side rebalancing for tax-sheltered accounts (IRAs, 401(k)s), where trading has no tax consequence, or for when a position has drifted so far that new cash alone can’t rein it in.

Illustrative planning math on the numbers you enter — not a recommendation to buy or sell any security, and not tax advice. Rebalancing in a taxable account can realize gains; check the tax side before you trade. Educational tool, not financial advice. Your figures never leave the page — the calculation runs entirely in your browser. The page loads standard pageview analytics, which never sees your numbers.