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What do I buy and sell to get back to my target mix?
$5,
This week: use new contributions to fill the underweight holding before you sell anything in a taxable account.
2 rebalancing actions to reach targets. Estimated cost: $10.00
Trades only cover holdings past the threshold, so buys and sells may not net to zero. Direct the difference to or from the other holdings or to cash.
| Asset | Current value | Current % | Target % | Deviation | Action |
|---|---|---|---|---|---|
| 65.0% | +5.0% | ||||
| 15.0% | -5.0% | ||||
| 8.0% | -2.0% | ||||
| 12.0% | +2.0% |
Currently 65.0%, target 60%
Currently 15.0%, target 20%
Rebalancing note: Selling an appreciated holding in a taxable account can trigger capital gains tax. New contributions can also move weights toward target.
Written by Elizabeth Stein
Start with a $100,000 portfolio split across four holdings: US Total Market at $65,000 (65%, target 60%), International Developed at $15,000 (15%, target 20%), Emerging Markets at $8,000 (8%, target 10%) and Bonds at $12,000 (12%, target 10%). With the threshold set to 5%, only the two holdings that drifted 5 points or more get a suggestion: sell $5,000 of US Total Market and buy $5,000 of International Developed. Emerging Markets and Bonds, at 2 points off target, stay untouched. The two trades carry an estimated $10 in transaction costs.
Finance Quest is educational. It is not financial advice, and no calculator here knows your full situation.
Selling an appreciated holding to fund a purchase in an underweight one looks costless here because the calculator only prices in a small transaction fee. In a taxable brokerage account, that sale can trigger capital gains tax that's often larger than any benefit from being precisely on target. When a rebalancing trade shows up in a taxable account, check whether a retirement account in the same household can absorb the trade instead, or whether directing new contributions toward the underweight holding gets you there without selling anything.
A common threshold is 5 percentage points, which is also this calculator's default. Wider bands mean fewer trades and lower costs; tighter bands keep your risk closer to target but generate more transaction activity.
Yes, by directing new contributions toward whichever holding is underweight instead of selling the overweight one. It's slower, but it avoids triggering any capital gains, which matters most in a taxable account.
Yes, and it's actually the easier place to use it. Trades inside a 401(k) or IRA don't trigger the capital gains tax that the same trade would in a taxable brokerage account, so exact rebalancing costs less there.
Because every dollar in the portfolio has to be assigned to something. If your targets sum to 95% or 105%, the trade suggestions would be sized against a mix that doesn't actually describe the whole portfolio, which is why the calculator flags it as an error.