Rebalancing drift calculator
Model how a simple 2-asset portfolio drifts over time when one side outperforms. Compare no rebalancing, annual, and drift bands side-by-side — with a live chart and cost estimate.
What this calculator tells you
Rebalancing is a risk control decision, not a return optimisation one. This tool helps you choose a rule you can actually stick to.
- None — let it drift. Simple, but risk creeps up over time.
- Annual — check and reset once a year. Predictable, low attention.
- Bands — only act when drift exceeds your threshold. Fewer trades, same control.
- Max drift — how far from target you can get (risk creep).
- Rebalance count — how hands-on the rule really is.
- Cost estimate — at small portfolio sizes, transaction fees matter more than “perfect” weights.
Model your drift & rebalance frequency
Results update live. The chart shows Asset A allocation over time for all three methods simultaneously — so you can see the difference at a glance.
Uses constant returns (not a market simulation). New contributions are invested at target weights, which reduces drift vs doing nothing. Band threshold applies to all three methods — only the “bands” scenario uses it actively.
| Method | Final value | Final allocation (A/B) | Max drift | Rebalances | Est. cost |
|---|---|---|---|---|---|
| No rebalancing | — | — | — | 0 | €0 |
| Annual | — | — | — | — | — |
| Bands (±5 pp) | — | — | — | — | — |
Transaction cost applies to traded value at each rebalancing event. Final values differ because each method deducts different cumulative costs.
Each line shows how far Asset A drifts from the target under each method. Rebalancing events snap the allocation back.
How to read the results
How far Asset A's weight got from your target at any point. Under "no rebalancing" with different return assumptions this grows continuously. With annual or bands, it resets. Drift is not inherently bad — it's only a problem when it pushes your risk beyond what you're comfortable with.
Bands usually produce fewer rebalances than annual over the same period — especially when returns are similar across assets. Fewer rebalances means lower total cost and less decision fatigue. The right answer is the one you'll actually execute consistently.
Transaction costs compound. At 0.1% per trade, the difference between annual and bands can be meaningful over 15+ years — especially when bands delay rebalancing by 1–2 years at a time. Try changing the cost % to see how sensitive your results are.
This uses constant returns — no volatility, no sequence risk, no taxes. Real markets are bumpier. The chart is useful for understanding structure (how each rule behaves), not for precise forecasting. Use rough estimates, not precise projections.
Want to explore more tools?
See how fees compound, how to model broker costs, or how cash drag affects long-term returns.
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Frequently asked questions
What is portfolio drift?
Drift is when your actual allocation moves away from your target because assets grow at different rates. A portfolio that starts at 80/20 equities/bonds will naturally tilt toward equities over time if equities outperform. The question is how much drift you're comfortable tolerating before resetting.
Are drift bands better than annual rebalancing?
Bands reduce unnecessary rebalancing by only triggering when drift is meaningful. Annual is simpler and more predictable — you check once a year regardless of what happened. For most passive investors a ±5 percentage point band or annual check is more than sufficient. The performance difference between the two is typically small; the execution difference is larger.
Do monthly contributions reduce drift?
Yes. Directing new contributions toward your underweight asset is a cost-free way to reduce drift — you rebalance through buying rather than selling. This is especially effective when your portfolio is smaller relative to your contributions, and it avoids triggering any transaction costs or tax events.
How wide should my rebalancing bands be?
For a simple 2–3 fund portfolio, ±5 percentage points is a common starting point. Wider bands mean fewer trades and lower costs; tighter bands mean closer tracking but more friction. The right width depends on your broker's transaction costs, the tax implications of selling in your country, and your personal tolerance for deviation from target. There's no universal correct answer.
Does rebalancing improve returns?
Not reliably. Rebalancing is primarily a risk management tool — it keeps your portfolio at the intended risk level rather than letting one asset class dominate. In trending markets (equities persistently outperforming bonds) it can reduce returns relative to doing nothing. The real value is discipline: you stay within your risk tolerance without needing to make active judgement calls each time.
QuantRoutine provides educational content only. This calculator uses a simplified deterministic model with constant returns — it does not simulate market volatility, sequence risk, taxes, tracking difference, or real-world execution effects. Results are illustrative only and should not be used as a basis for investment decisions. Always review your broker's current fee schedule and the tax rules that apply in your country before making rebalancing decisions.