Investing term

What is New-money rebalancing?

Bringing the portfolio back to target by directing new contributions into underweight sleeves, rather than selling overweight ones.

New-money rebalancing brings your portfolio back toward its target by steering fresh contributions into the underweight assets, rather than selling your overweight ones. It's elegant because it avoids triggering taxable gains and transaction costs — you nudge the mix back simply by choosing where new money goes. It works best while you're still regularly adding money.

For example

Stocks have run ahead of your target, so you direct this month's contribution entirely into bonds — rebalancing without selling a thing.

New-money rebalancing is taught hands-on in Stage 18 — Rebalancing & Maintenance.

See the lesson →

Related terms

5/25 ruleRebalance any sleeve that has drifted more than 5 percentage points absolute, or 25% relative, from its target weight.Calendar ruleRebalance on a fixed schedule (e.g. annually) regardless of how far the portfolio has drifted.Rebalancing premiumThe small return boost a disciplined rebalancer earns over a buy-and-drift portfolio, by systematically selling high and buying low.Target allocationThe intended weights of each asset class, sector, or position in your portfolio — the shape you set on a calm day.
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