Restore exposure without pretending to predict the winner.
If a suitable 60/40 target has become 66% shares, rebalancing moves towards the intended risk. It expresses no necessary forecast that shares will fall.
The adjusted portfolio can lag one left to drift if the reduced holding keeps rising. It can also lose money. Risk maintenance and a later return answer different questions.
Choose when to check and what a breach means.
- Calendar rule
- Reset on named dates; accept drift between them.
- Threshold rule
- Respond to distance from target; someone or something must detect it.
- Combined rule
- Check on scheduled dates, adjusting only after a breach; accept interim drift.
Less frequent checking saves attention and can avoid small transactions, while accepting interim drift. A threshold needs monitoring to detect a breach. Choose that workload and tolerance deliberately; neither frequency nor band supplies the original target.
Complete the rule before automating it
Specify percentage points or relative drift, treatment of a touched limit and the destination after adjustment. A combined rule can leave out-of-band exposure until its next check.
An annual reset is an organisational example, not a universal recommendation. A reminder and calculation can suffice; automation still needs correct holdings, prices and definitions.
New money changes the denominator.
One starting portfolio · €100,000
Shares €66,000 (66%) · Bonds €34,000 (34%)
Three independent alternatives from that start. All bar lengths use €0–€110,000; solid = shares, striped = bonds. Percentages use each portfolio's own total.
Move existing capital
Inside this goal's portfolio
Shares −€6,000 → sale proceeds → bonds +€6,000
Shares €60,000 · Bonds €40,000
Total €100,000 · Shares 60%
The sale and purchase stay inside the portfolio. Total unchanged.
Add €10,000 to bonds
Outside savings → €10,000 contribution → bonds
Inside this goal's portfolio
Shares €66,000 · Bonds €44,000
Total €110,000 · Shares 60%
No shares sold. The larger total restores 60/40.
Add €2,000 to bonds
Outside savings → €2,000 contribution → bonds
Inside this goal's portfolio
Shares €66,000 · Bonds €36,000
Total €102,000 · Shares 64.71%
A partial reset. The shares still exceed 60% of the new total.
After the €2,000 contribution: an optional €4,800 shares → bonds transfer gives €61,200 / €40,800, or 60/40 of €102,000. Accepted drift and costs determine whether to finish the reset.
Why adding differs from moving the same amount
After adding €2,000, bonds become €36,000 and the total €102,000. 60% of €102,000 is €61,200; the share excess is €66,000 − €61,200 = €4,800.
Buying €6,000 of bonds with new money differs from selling €6,000 of shares to buy bonds: new capital enlarges the total, while an internal sale/purchase redistributes it.
A cash flow must be available for this goal.
Retained distributions can fund an underweight part; a planned withdrawal from an overweight part can reduce a separate adjustment. Check access, deadline, restrictions and costs first.
Small expected contributions may leave a large mismatch for a long time. Bills, emergency reserves and a restricted pension are not automatically available for another account’s purchase. Fund a near-term bill reliably even if the preferred rebalance cannot finish first.
Keep the portfolio boundary unchanged
Transferring money between included brokers is no contribution to their combined portfolio. Apply the same boundary when comparing cash-flow routes.
Record an intentional partial adjustment.
Include commissions, spreads, conversion and local tax consequences. Contributions can avoid sales while incurring purchase costs; zero commission establishes neither a cost-free nor tax-free adjustment.
Acceptable remaining drift may save transactions. Use actual fills, charges and balances, including failed or partial orders. A small residual inside the agreed range need not trigger another trade.
Tax, minimum sizes and the completed result
Tax depends on holding, account and jurisdiction; the SEC fee explanation supplies no universal local result.
Rounding, minimum sizes and money retained for charges can prevent an exact reset. Distinguish an intended partial adjustment from differences caused by prices or fills departing from the preview.