Rebalancing brings your portfolio back to its target asset allocation. Over time, winning assets grow larger and losing assets shrink — drifting your actual allocation away from your target. Rebalancing means selling some of the winners and buying more of the losers to restore the original mix. It systematically forces 'buy low, sell high' behavior.

Two common approaches: (1) Time-based — rebalance on a schedule (annually or quarterly). Simple and disciplined. (2) Threshold-based — rebalance when any allocation drifts more than 5% from target. Captures bigger moves but requires monitoring. Most retail investors do annually; threshold methods can be more efficient if you check positions regularly.

It depends on age, risk tolerance, and goals. Common rules of thumb: 'Age in bonds' (a 40-year-old → 40% bonds, 60% stocks). Three-fund portfolios: 60% US stocks / 30% international / 10% bonds. Aggressive growth: 80–100% equities. Conservative: 40–60% equities. The calculator works with whatever target weights you specify.

Yes — selling appreciated assets in a taxable account creates capital gains. Strategies to minimize: (1) rebalance in tax-advantaged accounts first (401k, Roth IRA), (2) use new contributions to buy underweight assets rather than selling, (3) harvest losses on overweight positions, (4) hold winners over a year for long-term capital gains rates. Tax drag can outweigh rebalancing benefits if not managed.

This is when rebalancing helps most — equity allocations drop sharply, so you sell some bonds and buy more stocks at lower prices. But it requires emotional discipline; many investors freeze. Set rules in advance (rebalance when stocks drop 20% from peak, or annually regardless of market) so you don't have to decide in the moment.

Not always — in strong, sustained bull markets a buy-and-hold portfolio can outperform a rebalanced one because winners keep winning. Rebalancing's real value is risk control, not return enhancement. It prevents allocations from drifting to dangerous extremes (e.g. 95% equities heading into a bear market) and produces more predictable risk-adjusted returns.