Rebalancing is moving a portfolio back toward its target mix. The arithmetic is simple: for each asset class, compare its current value with its target value, and the difference is the amount to buy or sell. Methods differ in when you act, calendar or bands, and in how you close the gap, with new money or with sales.
Updated October 2026
Take the total portfolio value and multiply by each target percentage. That gives the target value for each class. Subtract the current value from the target value. A positive number is a shortfall, a negative number is an excess.
Because the total stays the same when you only shift money around, the excesses and shortfalls add up to zero.
A $100,000 portfolio has targets of 50% US stocks, 20% international stocks, 25% bonds and 5% cash. Current values are $56,000, $19,000, $21,000 and $4,000.
| Asset class | Target value | Current value | Difference |
|---|---|---|---|
| US stocks | $50,000 | $56,000 | -$6,000 (excess) |
| International stocks | $20,000 | $19,000 | +$1,000 (shortfall) |
| Bonds | $25,000 | $21,000 | +$4,000 (shortfall) |
| Cash | $5,000 | $4,000 | +$1,000 (shortfall) |
Closing every gap by trading inside the portfolio means selling $6,000 of US stocks and buying $1,000, $4,000 and $1,000 in the other three. That is the full-rebalance arithmetic.
A calendar rule rebalances on a schedule, for example once a year or each quarter, regardless of how far the mix has moved. It is easy to follow and needs no monitoring. The cost is that you may act when drift is trivial, or wait while it grows between dates.
A band rule acts only when a class moves past a threshold. An absolute band might be 5 percentage points: US stocks at 56% against a 50% target is 6 points off, so it triggers, while the other classes do not. A relative band might be 25% of the target: bonds at 21% against 25% is 16% off, so it does not.
Bands act less often than a calendar and respond to large moves. They need regular checking. Some people combine the two, checking on a schedule and acting only if a band is crossed.
If you add money regularly, you can direct it to the classes below target and sell nothing. Suppose you add $12,000 to the example. The new total is $112,000, and the target values become $56,000, $22,400, $28,000 and $5,600. US stocks are already at $56,000, so they get nothing. The $12,000 goes $3,400 to international stocks, $7,000 to bonds and $1,600 to cash, and every class lands on its target.
This works when contributions are large relative to the drift. If the excess is bigger than the new money, contributions alone cannot close the gap, and some selling or acceptance of remaining drift is the alternative.
Selling the excess and buying the shortfall restores targets immediately and does not depend on new money. It can also have consequences that contributions do not.
Neither approach is the right one in general. They trade off speed, tax effects and cost, and which matters most depends on your situation.
Stridefly shows drift against targets you set, and a rebalance plan that lists buy and sell amounts that would restore your targets. The plan is arithmetic on your own numbers, not a recommendation. Stridefly does not place trades, so you place any trades with your broker.
Its optional Tax Center produces an estimate, not tax advice, and is not a substitute for a tax professional.
Read more on the investing page, or join the waitlist for the private beta.
Rebalancing means moving a portfolio back toward its target allocation by buying classes below target and selling or not adding to classes above it.
A band is a threshold, such as 5 percentage points, that a class must cross before you rebalance.
Sometimes. New contributions directed to classes below target can close the gap if the contributions are large enough relative to the drift.
Selling in a taxable account may realize gains or losses. Talk to a tax professional about your situation.
Stridefly is in private beta. Join the waitlist and we will email you when a spot opens. Prefer to look around first? Demo mode lets you explore sample data before you connect anything.