portfolio-rebalancing

Rebalancing does not reliably improve returns — its primary purpose is risk control. By periodically trimming overweight positions and buying underweight ones, you systematically enforce the "sell high, buy low" discipline. Research (Vanguard, Morningstar) shows rebalancing reliably reduces portfolio volatility and prevents unintended risk drift, but the return impact is small and sometimes negative depending on the period measured. The strongest argument for rebalancing is behavioral: without it, a bull market in one asset class gradually concentrates risk that investors may not notice until a correction exposes it.

In Germany, selling appreciated positions triggers Abgeltungssteuer (26.375% on the gain above the Freistellungsauftrag of €1,000/year). This creates a tax cost to rebalancing that must be weighed against the benefit of restoring target allocation. Practical approaches to minimize tax drag: (1) Use cash-flow rebalancing via new contributions as the first option — no tax triggered. (2) Rebalance within a tax-advantaged structure if available (e.g., Riester or betriebliche Altersvorsorge). (3) Only sell to rebalance when the allocation deviation is significant (>5–10%) or when you have losses to offset gains (Verlustverrechnungstopf). The calculator shows the pre-tax rebalancing trades; the decision to execute involves your personal tax situation.

The most common threshold in academic literature and practitioner guidelines is 5 percentage points (absolute deviation). So a 70% equity target would trigger rebalancing if equity reaches 75% or drops to 65%. Some investors use relative thresholds (25% of target weight) — e.g., a 20% bond allocation triggers rebalancing at 25% (25% above 20%) or 15%. For simple 2-asset portfolios (equity + bond), the 5% absolute threshold is a sensible default. For more granular 5–10 asset portfolios, you may want a slightly wider 7–10% threshold to avoid excessive trading costs. The calculator lets you set your own threshold per asset.

Yes. Enter each ETF or individual stock as a separate line item with its current market value and target weight. For individual stocks, you may want to group them into categories (e.g., "Technology stocks" = 15% target) rather than targeting individual weights for each stock — unless you are deliberately running a concentrated stock portfolio with specific per-stock targets. The calculator works with any mix of assets as long as you can assign a current market value and a target percentage. Make sure your target weights sum to exactly 100% — the calculator will warn you if they do not.