₩6,000,000 each does not stay an equal split
A portfolio is the collection of investments you hold. Our fictional one has just A and B, worth ₩6,000,000 each at the start. Neither letter represents a particular fund or kind of investment. We choose a 50/50 target to make the arithmetic easy, rather than recommend that mix.
Suppose A's price rises 50% and B's stays the same. At current prices, A is worth ₩9,000,000 and B ₩6,000,000. The total is ₩15,000,000 without buying anything else or putting in more money. A's weight, its share of the account's current value, is ₩9,000,000 ÷ ₩15,000,000 = 60%. B is the other 40%.
On a narrow screen, scroll the tables sideways to see every column. No money is added or taken out during this first interval. Start without fees, taxes, cash payouts called distributions, or currency changes; a separate fee case comes later.
| Stage | A | B | Total | A's weight | B's weight |
|---|---|---|---|---|---|
| Initial portfolio | ₩6,000,000 | ₩6,000,000 | ₩12,000,000 | 50.00% | 50.00% |
| After A rises | ₩9,000,000 | ₩6,000,000 | ₩15,000,000 | 60.00% | 40.00% |
The gap between A's current 60% weight and its 50% target is 10 percentage points. That describes the changed split, not A's investment return: its price rose 50%. The original equal amounts and today's unequal weights can both be correct.
A now has more influence on the account's next gain or loss. Rebalancing aims to restore the intended mix. Whether to do so depends on why you chose the mix and whether that reason still holds. Equal amounts do not necessarily contribute equal risk or offset one another's losses. What the investments contain and how they move together still matter; those details are deliberately unspecified here.
Selling ₩1,500,000 of A or adding ₩3,000,000 to B
First use only money already invested. Half the current account is ₩15,000,000 × 50% = ₩7,500,000. Sell ₩1,500,000 of A and buy that much B. You then have ₩7,500,000 in each and the same ₩15,000,000 total, assuming no costs.
Only half the ₩3,000,000 gap needs to move, because every won taken from A is added to B. Moving the entire gap would reverse the imbalance to ₩6,000,000 in A and ₩9,000,000 in B. The aim is half of today's total, rather than restoring the original amounts invested.
Now leave A alone and add fresh money only to B. An extra ₩1,000,000 gives A ₩9,000,000, B ₩7,000,000 and a new total of ₩16,000,000. A still makes up 56.25%. The contribution approaches the target without reaching it. Each row below starts independently from A at ₩9,000,000 and B at ₩6,000,000.
| Separate case | Fresh cash | A afterward | B afterward | Total | A's weight | B's weight |
|---|---|---|---|---|---|---|
| Sell A and buy B | ₩0 | ₩7,500,000 | ₩7,500,000 | ₩15,000,000 | 50.00% | 50.00% |
| Add a smaller amount to B | ₩1,000,000 | ₩9,000,000 | ₩7,000,000 | ₩16,000,000 | 56.25% | 43.75% |
| Reach the target using fresh cash | ₩3,000,000 | ₩9,000,000 | ₩9,000,000 | ₩18,000,000 | 50.00% | 50.00% |
With A fixed at ₩9,000,000, B must also reach ₩9,000,000 for equal weights. That needs ₩3,000,000 in new money. The equation is ₩9,000,000 ÷ (₩15,000,000 + x) = 0.5. Moving existing money changes both sides; adding it changes B and the total. That is why the required amounts differ.
The ₩18,000,000 account includes money you added yourself. Its larger balance does not show a better investment return than the ₩15,000,000 trading case. Contributions and when they arrive must be accounted for before comparing performance.
Restoring the target can mean giving up some upside
Compare two accounts starting from the same ₩15,000,000 now, with no fresh cash. One leaves A at ₩9,000,000 and B at ₩6,000,000. The other first trades to hold ₩7,500,000 each. The three pairs below are separate possible next intervals, with no costs, distributions or currency changes. A distribution is cash paid to an investor.
| Next interval and approach | A at end | B at end | Total at end | Portfolio return |
|---|---|---|---|---|
| A rises 20%, B flat: keep holdings | ₩10,800,000 | ₩6,000,000 | ₩16,800,000 | 12.00% |
| A rises 20%, B flat: rebalance first | ₩9,000,000 | ₩7,500,000 | ₩16,500,000 | 10.00% |
| A falls 20%, B flat: keep holdings | ₩7,200,000 | ₩6,000,000 | ₩13,200,000 | −12.00% |
| A falls 20%, B flat: rebalance first | ₩6,000,000 | ₩7,500,000 | ₩13,500,000 | −10.00% |
| Both fall 20%: keep holdings | ₩7,200,000 | ₩4,800,000 | ₩12,000,000 | −20.00% |
| Both fall 20%: rebalance first | ₩6,000,000 | ₩6,000,000 | ₩12,000,000 | −20.00% |
If A rises another 20% while B stays flat, keeping more A produces ₩16,800,000, a 12% gain. The equal split produces ₩16,500,000, or 10%. Selling some of the investment that kept rising gave up part of that gain.
If A falls 20% and B stays flat, having reduced A makes the loss smaller. It does not remove the loss. If both investments fall 20%, either account loses 20% over the interval.
The interval begins at ₩15,000,000 rather than the original ₩12,000,000. An account can lose money during this interval while still having gained since the first investment. Dates and cash flows need to match when comparing returns. None of these paths tells us which comes next: restoring the target changes how the holdings drive returns, without guaranteeing a better result.
A trading fee slightly changes the amount to sell
Return to A at ₩9,000,000 and B at ₩6,000,000 for a separate fee example. Each trade costs an invented fixed ₩1,500, paid from the account. The two fees total ₩3,000, leaving ₩14,997,000. Equal weights after paying them therefore mean ₩7,498,500 in each holding.
| Separate case | A sold | Total fees | B bought | A afterward | B afterward | Total afterward |
|---|---|---|---|---|---|---|
| No fees | ₩1,500,000 | ₩0 | ₩1,500,000 | ₩7,500,000 | ₩7,500,000 | ₩15,000,000 |
| Fixed fee on each trade | ₩1,501,500 | ₩3,000 | ₩1,498,500 | ₩7,498,500 | ₩7,498,500 | ₩14,997,000 |
To leave that amount in A, sell ₩1,501,500 of it. Pay the first ₩1,500 fee and ₩1,500,000 cash remains. Spend ₩1,498,500 on B and ₩1,500 on the purchase fee. No cash is left, and each holding is worth ₩7,498,500.
Selling and buying the cost-free ₩1,500,000 amounts would leave no money to pay the fees. These invented fees are neither a broker's quoted charges nor a tax rate, and are excluded from the return comparisons above.
Our model allows any needed amount to be traded at the valuation price. Actual orders may require whole shares or minimum sizes. Buyers and sellers may offer different prices, creating a spread, and prices may change before a trade completes. Taxes and fees depend on the account and product. Adding cash avoids selling an existing holding but can still incur buying costs.
A review date and a weight limit answer different questions
A calendar rule might review the mix every six months. A band rule might flag a 50% target when the weight moves outside 45%–55%. Those are examples, not a recommended schedule or threshold. A five-percentage-point band is not a 5% relative change: 5% of a 50% weight is only 2.5 percentage points.
A review may lead to a trade, a cash contribution or no immediate adjustment. Expected contributions may bring a modest drift closer to target. Costs may make an exact reset impractical. Having to buy and sell complete shares rather than fractions can also leave the weights slightly away from target. A changed goal, time horizon or capacity for losses may call for reconsidering the target itself.
The contents of the holdings matter too. Two ETFs can overlap heavily even when their account values are equal. Our ETF overlap and diversification guide follows that problem. The index ETF comparison guide looks inside similar fund names, while regular contributions versus a lump sum addresses when money enters the market. Rebalancing deals with the mix after money is invested.
About the examples
A, B, the price paths, the 50/50 target, review rules and fees are fictional. Both languages use the same Korean-won amounts. The model permits continuously divisible amounts traded at the stated valuation prices; an actual service may not support the required fractional units.
Contributions, future price paths and the fee example are separate cases. Returns start from ₩15,000,000; account balances containing fresh contributions are not compared as outperformance. Tax and spread are zero throughout, and trading fees are zero except in the fixed-fee example. Percentages are rounded after calculation. No allocation, review schedule or trade is recommended. See our editorial policy.