Asset Allocation Drift Calculator

A portfolio set to 60% equities and 40% bonds that has run up to 68/32 has drifted by 8 percentage points. Threshold rebalancing compares that gap against a figure set in advance, commonly around 5 points, and treats anything larger as a signal to review the mix. The calculator does that comparison on whatever threshold is entered rather than assuming a standard one.

Quick example

With current equity of 68% and target equity of 60% (plus rebalance threshold of 5%), the result is 8.00 percentage points.

Which inputs matter most

Two of the three inputs decide the answer. Drift is the absolute gap between Current Equity % and Target Equity %, so 68 against 60 and 52 against 60 both register as 8 points; direction does not change the size of the reading. Rebalance Threshold does not enter that arithmetic at all. It only sets where the flag turns over, which is why raising it from 5 to 10 leaves the drift figure untouched while changing whether the portfolio reads as inside or outside tolerance.

What's happening under the hood

Drift is the absolute difference between the current and target equity percentage, measured in percentage points rather than as a proportion. An 8-point move from 60 to 68 is a 13.3% relative change in the equity holding, and the two figures are easy to confuse when comparing thresholds quoted by different sources. This calculator reports the point difference. The threshold is then compared against it with a strict inequality, so a drift exactly equal to the threshold reads as within tolerance rather than outside it.

Where to go next

This calculation rarely sits alone. The portfolio rebalancing calculator works out the trades that close the gap once it is flagged, the rebalancing trigger calculator compares threshold and calendar approaches over time, and the asset allocation calculator sets the target this tool measures against.

Why a portfolio drifts on its own

Allocation drift is what happens when one part of a portfolio grows faster than the rest. Nothing is bought or sold, yet the mix moves. Getting from 60/40 to 68/32 with no trades takes a substantial gap between the two sides: the equity holding has to grow about 42% more than the bond holding over the period, which a year of strong equity returns alongside falling bond prices can produce. The calculator measures the resulting gap in percentage points and compares it against the threshold entered, so at the defaults an 8-point drift against a 5-point threshold is flagged.

Threshold against calendar rebalancing

Threshold rebalancing and calendar rebalancing answer the same question differently. A threshold responds to what markets actually did; a fixed date responds whether or not anything moved. Around 5 percentage points is a widely used setting, and wider bands of 10 points or more trade more variation from target for fewer transactions. The level that fits a portfolio depends on dealing costs, any tax charged on disposals, and how much variation from target is acceptable, which is why the threshold is an input here rather than a fixed assumption.