How often should a portfolio be rebalanced?

Annual or threshold-based rebalancing (when weights drift >5%) typically works well for retail portfolios. The optimal frequency balances risk reduction from rebalancing vs. transaction costs incurred.

What is the drift cost?

As winners grow in value, the portfolio becomes overweight in recently outperforming assets. This can increase risk above target levels. The drift cost is the excess risk taken by not rebalancing.

Portfolio Rebalancing Cost-Benefit Calculator

Analyze the optimal rebalancing strategy for a multi-asset portfolio. Compare calendar rebalancing, threshold-based rebalancing, and hybrid approaches. Calculate expected drift costs vs. transaction costs for different rebalancing frequencies.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Analyze the optimal rebalancing strategy for a multi-asset portfolio. Compare calendar rebalancing, threshold-based rebalancing, and hybrid approaches. Calculate expected drift costs vs. transaction costs for different rebalancing frequencies. Use the rebalancing calculator result to inform your calculation.

Portfolio Rebalancing Cost-Benefit Calculator

How to Use

Frequently Asked Questions

How often should a portfolio be rebalanced?

What is the drift cost?