Portfolio Rebalancing Calculator

What Is Portfolio Rebalancing?

Portfolio rebalancing is the process of adjusting the weightings of assets within an investment portfolio to bring them back in line with your target allocation. Over time, as different investments grow at different rates, the actual percentages shift away from what you originally intended. Rebalancing involves selling some of what has grown too large and buying more of what has become underweight.

The purpose of rebalancing is not to maximise returns. It is to maintain the level of risk you originally chose. Left unchecked, a portfolio that drifts toward its best-performing assets becomes increasingly concentrated in whatever has gone up the most recently, which often means it has become riskier than intended.

Why Rebalancing Matters

First, it controls risk. Without rebalancing, a portfolio naturally drifts toward whichever asset class has performed best. During extended bull markets in equities, this means your portfolio becomes increasingly stock-heavy, leaving you more exposed to the next downturn than you intended.

Second, rebalancing builds discipline into the investment process. You sell some of what has risen most and add to what has lagged because your rule says so, not because of how the market makes you feel that day.

Third, rebalancing keeps your portfolio aligned with your financial goals. A 35-year-old saving for retirement in 25 years has very different risk needs than a 55-year-old ten years from retirement. Rebalancing ensures your asset mix continues to reflect where you are in your financial journey, not just where markets have taken it.

How to Use This Rebalancing Calculator

Start by entering each asset class or holding in your portfolio along with its current value. Then set the target allocation percentage for each one. Your target allocations should add up to 100%.

The calculator compares what you hold with the mix you want and shows how much to sell and buy in each holding to get back to it. Each holding has its own currency, and everything is converted into the currency you choose for the answer, at rates you can edit. If you hold more than one currency, switch to "Rebalance by currency" at the top of the page to see how your money is split by currency and how much to move to reach the split you want.

When Should You Rebalance?

Calendar-based rebalancing means checking your portfolio on a fixed schedule, every three, six or twelve months, and rebalancing however far it has moved. It is the simplest rule to follow.

Threshold-based rebalancing means you act only when a holding is further from its target than a limit you set in advance, for example 5 percentage points. It reacts to what markets do instead of to the calendar.

Whichever of the two you choose, write the rule down and follow it whatever the market is doing, so that the decision does not depend on how you feel that day.

Rebalancing Without Selling: The Cash Flow Method

You can also rebalance without selling: put new money into the holdings that are below their share instead of selling the ones above it. Where tax is charged on a gain when you sell, no sale means no such tax, and your portfolio still moves toward the mix you want. The calculator works this route out under "Two ways to do it". How much new money it takes depends on how far your mix has moved.

Common Rebalancing Mistakes to Avoid

The first mistake is not rebalancing at all: setting a target mix once and never looking at it again, so the portfolio follows the market for years. That can leave you carrying much more risk than you chose.

Rebalancing too often is another trap. Every sale can cost a fee and, where gains are taxed, tax. Doing it every week or after every small market move multiplies those costs.

Rebalancing based on emotion rather than targets is also problematic. The urge to increase your stock allocation after a strong market run, or to reduce it after a crash, is the opposite of what disciplined rebalancing prescribes. Stick to your predetermined targets and let the process work.

Frequently Asked Questions

Asset Allocation, Sharpe Ratio & Drawdown: Measuring Portfolio Quality

Your target mix is one of the biggest decisions in a long-term portfolio, because it sets how much of your money rides on each kind of investment. The shares you type into this calculator should reflect how long you are investing for, how big a fall you could sit through, and the income you need. Rebalancing is how you keep to that decision once markets start to move it.

The Sharpe ratio measures return for the risk taken: the portfolio's return above the risk-free rate, divided by how much the return swings (its standard deviation). The Sortino ratio does the same but counts only the swings downward, so it does not penalise a portfolio for rising sharply. Between two portfolios with similar returns, the one with the higher ratio got there with less risk. This calculator does not compute either one.

A drawdown is the fall in a portfolio's value from a peak to the low that follows it. The maximum drawdown is the largest such fall on record. It matters because a large fall is when it is hardest to keep to a plan. A portfolio that has drifted toward shares after a long rise has more riding on shares than the mix you chose, so it has more to lose when they fall: that is the risk rebalancing is there to control.

The expense ratio is the yearly cost of owning a fund, as a percentage of what you hold in it. A fund that charges 1% a year takes 1,000 a year for every 100,000 you hold, whether the fund goes up or down. This calculator does not count fund costs, so compare them yourself when two funds would fill the same place in your mix.

Understand the strategy behind rebalancing: Capital Allocation Guide →