An Investor's Guide to Portfolio Rebalancing

Portfolio rebalancing is the process of realigning the weightings of a portfolio of assets. This involves periodically buying or selling assets in a portfolio to maintain a desired level of asset allocation and risk.

For example, suppose your target allocation is 60% stocks and 40% bonds. After a strong year for stocks, your portfolio might drift to 70% stocks and 30% bonds. Rebalancing would mean selling some stocks and buying some bonds to get back to your original 60/40 split.

The primary goal of rebalancing is to manage risk. As different asset classes grow at different rates, your portfolio can become more concentrated in certain areas than you originally intended.

By rebalancing, you are systematically selling high (the assets that have performed well) and buying low (the assets that have underperformed). This disciplined approach prevents you from becoming overexposed to a particular asset class and helps keep your portfolio's risk level consistent with your financial plan.

Our tool simplifies the rebalancing process:

• Asset List: For each asset in your portfolio (e.g., US Stocks, Bonds), enter its name, current market value, and your target allocation percentage for it.
• Add/Remove Assets: Use the buttons to add new assets or remove existing ones. Ensure your total target allocation adds up to 100%.
• New Investment: Enter any new cash you're adding to the portfolio (or a negative number for a withdrawal).
• Calculate Rebalance: Click the button to get a clear, actionable plan of which assets to buy or sell to get back to your target allocation.