Portfolio Rebalancing Calculator
This is a tool that all self-directed investors can use to their advantage.
Successful investors control for risk. Long-term success is the result of maintaining control. The Portfolio Rebalancing Calculator enables you to sell high and buy low as you minimize your risk exposure.
With index funds, broad exposure to entire markets is just a few clicks away. With the right assortment of funds, risk can be reduced through diversification across the stock, bond, real estate, gold, and cryptocurrency markets. Risk can be spread across regions. Or allocated more heavily to sectors that are expected to outperform. The options are limitless.
There's a huge benefit to spreading your investments across different markets. It not only reduces risk through diversification, but enables you to recognize gains and buy discounts as markets alternate through their cycles.
Start with a portfolio that's allocated according to your tolerance for risk. Let the different markets move through their cycles. Some markets will go up as others go down. To get the portfolio back in balance, systematically sell funds that have outperformed and reinvest that proceeds in underperforming funds that are now priced at a discount. Repeat every few months as markets continue to move through their cycles. That's all it takes to achieve long-term success in the investment world.
Enter your index funds, target weights, number of shares held, current market price, and cash contributions in the yellow input sells. The grey cells indicate the number of shares that need to be bought and sold of each fund in order to maintain a balanced portfolio.
Imagine selling high and buying low as you rebalance between funds in these market conditions. There's no need to predict market direction. It can be done systematically.
The delivered spreadsheet is designed for a portfolio of 10 or fewer funds. This is optimal because the benefits of rebalancing diminish when capital is spread thinly across too many funds.
If you're interested in a preformatted spreadsheet that can handle greater than 10 funds, please contact me: theselfmadeinvestor@gmail.com
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