Portfolio Rebalancing Calculator
Calculate how much to buy or sell to rebalance your investment portfolio.
What this calculator does
This calculator tells you exactly what to buy and sell to bring a drifted portfolio back to its target allocation. Enter your total portfolio value along with current and target percentages for equities, bonds, and cash, and it returns the pound adjustment needed in each — positive to buy, negative to sell.
Turning percentages into pounds is the whole value. Knowing you are 8 percentage points overweight in equities is abstract; knowing you need to sell £14,400 of equities and buy £9,000 of bonds is an instruction you can act on this afternoon.
When to use it
Use it at your scheduled rebalancing review — annually for most people, or whenever an allocation drifts more than 5 percentage points from target. After a strong equity year or a sharp market fall are the two moments the drift is largest and the discipline hardest to follow.
It is also how you implement a deliberate change in strategy, such as moving from 70/30 to 60/40 as retirement nears. And it works as a planning check in reverse: if the required trades would realise a gain above the CGT annual exempt amount, that is a signal to redirect new contributions toward the underweight asset rather than selling.
Understanding the inputs
Total portfolio value should include all your investment accounts together — Stocks and Shares ISA, pensions, and any general investment account. Rebalancing works across the whole portfolio rather than account by account, because managing each in isolation forces avoidable taxable disposals.
Current percentages come from your actual holdings today and need to sum to 100. Target percentages are the allocation you decided on, not what feels comfortable after a good or bad year. A common starting point is 110 minus your age in equities, with the remainder split between bonds and cash. Cash is typically 5 to 10 percent — enough for near-term needs and opportunistic buying.
How is this calculated?
Amount to Buy/Sell = (Target % − Current %) × Total Portfolio. Positive = buy, negative = sell.
A worked example
Suppose you hold £180,000 across your ISA and pension, currently 68 percent equities, 25 percent bonds, and 7 percent cash after a strong year. Your target is 60/30/10.
The calculator shows you need to sell £14,400 of equities, buy £9,000 of bonds, and move £5,400 into cash. Where you do it matters. Switching inside the ISA or pension carries no tax at all. Making the same £14,400 disposal in a general investment account with a £6,000 embedded gain would use most of your CGT annual exempt amount and could leave a bill at 18 or 24 percent on the excess.
Limitations and assumptions
The calculator gives a pure arithmetic answer and ignores what makes rebalancing costly in practice: capital gains tax on disposals outside a wrapper, dealing charges, bid-offer spreads, and the 30-day share matching rules. In a general investment account those costs can outweigh the benefit of a small correction.
It also models three broad buckets only, so it cannot handle allocation within equities — UK versus global, growth versus value, large versus small — or property, infrastructure, and alternatives. Nothing here implies a particular allocation is right for you, and rebalancing does not protect against loss. Market returns are unpredictable and this is not regulated financial advice.
Common Questions
- Why does a portfolio need rebalancing at all?
- Because assets grow at different rates, so the mix drifts from what you chose. A 60/40 portfolio in a year where equities return 20 percent and bonds 2 percent ends at roughly 64/36. Left alone through a long bull market, a moderate portfolio quietly turns into an aggressive one without you deciding anything.
- How often should I rebalance?
- Annually is the common default and performs about as well as anything more frequent. The main alternative is threshold rebalancing — acting only when an allocation drifts more than 5 percentage points from target. Research finds little difference between sensible approaches, and rebalancing too often usually costs more than it gains.
- Does rebalancing improve returns?
- Not reliably. Over long periods it tends to reduce returns slightly, because it trims whatever has performed best. What it does is control risk, holding your portfolio at the volatility you actually chose. Treat it as risk management rather than a return-enhancing strategy.
- How do I rebalance without triggering capital gains tax?
- Rebalance inside an ISA or pension first, where switches have no tax consequence at all. In a general investment account, direct new contributions and dividends toward the underweight asset rather than selling the overweight one. Gains above the CGT annual exempt amount are taxed at 18 or 24 percent depending on your band.
- What if I cannot bring myself to sell the winner?
- That reaction is universal, and it is precisely why rebalancing works as a discipline. Selling what has risen to buy what has lagged feels wrong every time. If the friction is too great, use new monthly contributions to correct the drift instead — slower, but far easier to sustain year after year.
- Does rebalancing cost anything on a UK platform?
- Fund switches are usually free, and many platforms charge nothing for regular investing, though ETF and share dealing typically costs a few pounds per trade. Bid-offer spreads on less liquid funds add a little. The larger cost is capital gains tax outside an ISA, which is why the wrapper matters more than the dealing fee.
- Should my target allocation change over time?
- Yes, gradually. Most people reduce equity exposure as their horizon shortens, since a portfolio you will draw on within five years has less time to recover from a fall. Lifestyle and target date funds automate this. Do not confuse a planned shift in target with a reaction to recent market movement.
- What counts as cash in an allocation?
- Money market funds, short-dated gilts, a Cash ISA, or an easy-access savings account. Most portfolios hold 5 to 10 percent, enough for near-term needs and to buy in a downturn without selling anything. Cash held far above that is usually a decision not yet made rather than a deliberate allocation.
- Do I need to rebalance each account separately?
- No. Look at your allocation across your ISA, pension, and general investment account combined, then execute trades wherever they are cheapest — normally inside the ISA or pension. Managing each account to the same target independently forces avoidable taxable disposals.
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