The target table contains information for the portfolio, not simply the selected account. It shows the big picture. You enter the target percentage for each asset class. All other values are calculated as an aggregate of individual accounts. The table includes actual percentages with current holdings and plan percentages expected after rebalancing trades are executed. The example table contains quite a few asset classes. The high level overview is captured in the "Imbalance" row, just below the primary table. This portfolio has an overall imbalance of 53.40 percent which will be reduced to 4.37 percent when trades are executed. Imbalance could be reduced to zero at the expense of higher trading costs.
In the very beginning the target table will be empty. The asset class column is automatically populated as you fill in the asset table (the bottom half of the main window) for each account. The Actual column is populated when shares and prices are entered in the asset table. You must enter values in the Target column. These must add up to 100 percent. The imbalance row displays the deviation from 100 for the Target column. For example, a target column imbalance of 5 means that targets add up to 105 and therefore one or more entries in the column need to be lowered. Don't be alarmed if the actual imbalance is a large number during the initial setup phase. It's not meaningful until the asset table is complete and target values have been entered. Even then you may experience a large initial imbalance.
Next we introduce an example with three asset classes to illustrate how the target table works. The main window will look like the one below after defining one account (Ted) and entering assets in the asset table.
The target imbalance with a cautionary yellow background is -100 because targets have not been entered. Also, shares and price have not yet been entered for the three assets:
- BND -- Fixed Income, Vanguard Total Bond Market ETF
- VTI -- US Stocks, Vanguard Total Stock Market
- VXUS -- Foreign, Vanguard Total International Stock Market
After entering shares and price in the asset table and target in the target table the window will be this view.
The plan and actual columns are the same because there is no plan, yet. We calculate a plan (the trades) by clicking on the Rebalance button above the seesaw diagram. Here is the result.
Observe that the plan exactly matches the target. Trades required to exactly balance the portfolio appear in the rightmost column of the asset table. The basis entry in the asset table was not entered, because the account is an IRA. Capital gains do not apply.
Target table values are displayed as percentages. Toggle between the Percent view and $$$ view by clicking on the header bar. Here is a side-by-side comparison of the two view options, with a perfectly balanced plan.
Observe that the Imbalance row is changed to Total when the $$$ view is selected. Target entries are prohibited when in the $$$ view.
The target table has now been completely described, except for the Cash Reserve row at the bottom. See Cash Manager to learn about cash reserve.