Rebalancing Bands
Pre-set thresholds that tell you when an asset class has drifted enough to trigger a rebalance.
What You Need to Know
Rebalancing bands are guardrails that prevent over-trading while still keeping your portfolio on track. Instead of rebalancing on a strict calendar, you only act when an allocation crosses a tolerance band.
Typical Bands:
- ±5% for major asset classes (stocks vs. bonds)
- ±2% for sub-asset classes (U.S. vs. international stocks)
- Wider bands (10%) for volatile or alternative assets
Benefits:
- Cuts unnecessary trades and capital gains taxes
- Responds to meaningful market moves, not noise
- Keeps risk profile aligned with your plan
Example: Stock target = 60% with a ±5% band. You only rebalance when stocks fall below 55% or rise above 65%.
Related Calculators & Tools
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Related Terms in Investment Analysis
Appreciation
The increase in an asset's value over time, whether it's real estate, stocks, or other investments.
Asset Class
A group of investments with similar behavior, risk, and regulatory profiles (e.g., stocks, bonds, cash).
Bond
A fixed-income investment where you loan money to a government or corporation in exchange for regular interest payments.
Bond Yield
The return an investor earns on a bond, expressed as a percentage, which can be calculated as current yield (annual interest ÷ current price) or yield to maturity (total return if held until maturity).
Capital Gains Tax
Tax on profits from selling investments like stocks, bonds, or real estate.
Capital Loss
A loss realized when you sell an investment for less than you paid for it, which can offset capital gains for tax purposes.