Portfolio Rebalancing: Drift, Bands, Cash-Flow & Tax-Aware Rebalancing

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Grow Maya's five-asset portfolio through one year of returns, measure the new weights and find which asset class drifted furthest from its target.
• Turn Maya's drifted portfolio back into its target mix: target values, buy and sell amounts, whole units to trade and the turnover.
• Run a 60/40 portfolio through ten illustrative years twice, left alone and rebalanced every year end, compare the end values and the stock weight and chart both paths.
• Give every asset class its own tolerance band with the 5/25 rule, flag the ones outside it and colour those rows.
• Maya adds $30,000. You steer the new money only into the underweight assets, see how close that gets her to target without selling anything, and how much she would need to add to get there fully.
• Skip Maya's trades that are too small to be worth it, price the remaining ones with a fixed fee plus a spread and express the total cost in basis points.
• Maya must sell $36,000 of her US stock fund to rebalance. You work out which lots are sold under FIFO and under HIFO, the realised gain of each and the tax that the lot choice saves.
• Compare buy-and-hold with yearly rebalancing for two volatile funds that zig-zag in opposite years: growth, CAGR, maximum drawdown and volatility.