Portfolio Rebalance

Portfolio Rebalance

Workflow

Step 1: Current State

For each account, capture:

• Account type (taxable, IRA, Roth, 401k)
• Holdings with current market value
• Cost basis (for taxable accounts)
• Unrealized gains/losses per position

Step 2: Drift Analysis

Compare current allocation to IPS targets:

| Asset Class | Target % | Current % | Drift | $ Over/Under |

|------------|----------|-----------|-------|-------------|

| US Large Cap Equity | | | | |

| US Small/Mid Cap | | | | |

| International Developed | | | | |

| Emerging Markets | | | | |

| Investment Grade Bonds | | | | |

| High Yield / Credit | | | | |

| TIPS / Inflation Protected | | | | |

| Alternatives | | | | |

| Cash | | | | |

Flag positions exceeding the rebalancing band (typically ±3-5%).

Step 3: Trade Recommendations

Generate trades to bring allocation back to target:

Tax-Aware Rebalancing Rules:

• Prefer rebalancing in tax-advantaged accounts (IRA, Roth) first — no tax consequences
• In taxable accounts, avoid selling positions with large short-term gains
• Harvest losses where possible while rebalancing
• Watch for wash sale rules (30-day window) across all accounts
• Consider directing new contributions to underweight asset classes instead of trading

Trade List:

| Account | Action | Security | Shares/$ | Reason | Tax Impact |

|---------|--------|----------|----------|--------|-----------|

| | Buy/Sell | | | Rebalance / TLH | ST gain / LT gain / Loss |

Step 4: Asset Location Review

Optimize which assets are held in which account types:

• Tax-deferred (IRA/401k): Bonds, REITs, high-turnover funds (highest tax drag)
• Roth: Highest expected growth assets (tax-free growth)
• Taxable: Tax-efficient equity (index funds, ETFs, munis), tax-loss harvesting candidates

Step 5: Implementation

• Total trades by account
• Estimated transaction costs
• Estimated tax impact (realized gains/losses)
• Net effect on allocation drift

Step 6: Output

• Drift analysis table
• Recommended trade list (Excel)
• Tax impact summary
• Before/after allocation comparison

Important Notes

• Don't rebalance for rebalancing's sake — small drift within bands is fine
• Tax costs can outweigh rebalancing benefits in taxable accounts — calculate the breakeven
• Consider pending cash flows (contributions, withdrawals, RMDs) before trading
• Check for any client-specific restrictions (ESG, concentrated stock, lockups)
• Document rationale for every trade for compliance records
• Wash sale rules apply across accounts — coordinate trades across the household