Work through a tax-aware rebalance
Design a rebalancing trade sequence that uses cash flows and tax location before realizing gains.
A $1.5 million portfolio targets 60% equities and 40% bonds. Actual allocation is 66% equities and 34% bonds. A $75,000 contribution is arriving. Confirm the drift, then use cash flows and tax-advantaged trades before taxable sales. The common trap is exact rebalancing through taxable sales even when cash flows can bring the account back inside band. Step 1 Actual equities = 66% $1,500,000 = $990,000; actual bonds = $510,000 The portfolio is $90,000 above the 60% equity target before considering new cash. Step 2 After $75,000 contribution, total portfolio = $1,575,000 New cash changes the target dollar amounts, so calculate…
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