How portfolio rebalancing works: a simple example

Define the target before doing the arithmetic

Rebalancing compares a portfolio’s current allocation with a target allocation. The target is an assumption you supply, not a recommendation generated by this website. Investor.gov explains rebalancing as bringing a portfolio back toward its intended allocation and notes that transaction costs and tax consequences can matter.

A two-asset example without fees

Imagine $7,000 in Asset A and $3,000 in Asset B. Total value is $10,000. The current allocation is 70% and 30%. For illustration only, choose a 60%/40% target.

At zero fees and unchanged prices, the sale and purchase balance exactly. Total portfolio value remains $10,000. This example does not select particular assets or say that 60%/40% is suitable for you.

Try the planner carefully

1. Enter one row per asset with its current USD value and target percentage.
2. Check that target percentages total 100.
3. Enter your cash contribution or withdrawal assumption and transaction fee.
4. Calculate and inspect every proposed buy or sale.

Use known holdings can populate priced assets from your workspace. In All portfolios, identical asset IDs are combined. Unpriced holdings are explicitly excluded, so a known-value subtotal may not represent your whole portfolio. Check the excluded count before interpreting any allocation chart.

Fees change the result

If trading costs money, not all sale proceeds can become a new purchase. Re-run the planner with the assumed fee instead of subtracting a rough amount from just one trade. Target values in a fee-aware scenario can differ from the zero-fee table. Real execution can also differ because prices move, orders fill partially or minimum order sizes apply.

Consider contributions and recordkeeping

New cash directed toward an underweight asset can change allocations without an immediate sale. The trade-off depends on your own target, cash needs and constraints. Compare assumptions rather than treating the largest proposed trade as an instruction. Keep an export of the reviewed scenario if useful, then record actual executions separately.

Saving a plan never places orders, changes holdings or creates a tax filing. The tool does not assess whether an allocation suits your circumstances. Its role is to make the arithmetic and stated assumptions visible.