Tools / Invest / Chapter 22 · Building and Keeping a Portfolio
Rebalancing
Over time winners grow and the mix drifts. Rebalancing is the discipline of returning to your chosen mix, selling some of what has risen and buying what has lagged, or simply directing new money.
1 · The idea
Trade needed
Multiply the total portfolio (plus any new money) by each target weight to get the value that holding should have. The trade is the difference from what you hold now: positive means buy, negative means sell.
The formula
Trade = target weight × (total + new money) − current value
- target weight
- the share of the portfolio you decided on
- total
- current value of everything
- new money
- any amount you are adding
2 · A worked example
A 60/40 plan that has drifted to 70/30: sell $10,000 of the first holding and buy $10,000 of the second. Adding $10,000 of new money instead needs only $14,000 into the second and nothing sold.
3 · Now use your own numbers
Change anything. The result updates instantly.
Illustrative, not personal advice. Inspired by Chapter 22 · Building and Keeping a Portfolio of Money, Explained From the Inside. Your figures stay in this browser. Real products add terms, taxes and conditions that this simple model leaves out.
4 · Take care
What this tool can’t see
- Selling can trigger tax or trading costs: using new contributions to rebalance avoids both.
- Decide a rule in advance (for example once a year, or when a holding drifts by 5 points) so emotion does not decide.
- This tool does not recommend any allocation.
5 · Go further
Where this fits
See it in a life:
Private to this device. Nothing is sent anywhere.
Keep the thinking going. Checklists, questions and worksheets inspired by the book, for the next time money is on the table. Part of the Reader’s Letter: a few times a year, never more.
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