Portfolio Rebalancing

Portfolio rebalancing is a process of buying and selling investments in your portfolio to bring it back to target allocation after prices of you holdings have moved after some period of time. It is usually done on an annual or a quarterly basis. Of course you can leave it to your financial adviser/stock broker or you can just do it yourself using Online Portfolio Rebalancing Tool, Microsoft Excel or Google Sheets and few minutes. Below you can find easy to follow steps and examples.

All Weather Portfolio Example

Let's take as an example "All Weather Portfolio" which is 30% stocks, 15% short bonds, 40% long bonds, 7.5% gold, and 7.5% Commodities.

Allocation Description Symbol Name
30% Stocks VTSAX Vanguard Total Stock Market Index Fund
15% Short bonds VFITX Vanguard Intermediate-Term Treasury Fund
40% Long bonds VUSTX Vanguard Long-Term Treasury Fund
7.5% Gold GLD Gold Shares ETF
7.5% Commodities DBC PowerShares DB Commodity Tracking ETF

Since last time we rebalanced stocks and bonds dropped while gold and other commodities have increased in value. Now to bring our portfolio back into balance we need to sell gold and commodities and buy stocks and bonds. There is really easy way to calculate how many shares you need to buy and how many to sell.

Google Sheets Rebalancing Example

Google Sheets Rebalancing Example Click to enlarge the image
  • Enter current market prices and quantity for your holdings
  • Calculate Amount by multiplying Quanity by Price
  • Add it all up to calculate Total value of your portfolio
  • Calculate Current Allocation just for reference
  • Calculate Rebalance by substracting current amount from target amount
  • Done Rebalance column shows how many shares you need to buy or to sell (if number is negative)

Microsoft Excel Rebalancing Example

Microsoft Excel Rebalancing Example Click to enlarge the image
Markets Chart