# Rebalancing bot: keep your portfolio at its target mix

> Run a 60/40 or Golden Butterfly rebalancing bot. See the rules and backtests, then run it on paper or in your own Alpaca account.

Written by [Tactfolio research team](https://tactfolio.com/about/editorial-policy.md), published 2026-10-16, updated 2026-10-16, data as of 2026-09-25.

A rebalancing bot keeps a portfolio at its target mix by trading back to set weights on a schedule. On Tactfolio you can start from three ready-made mixes: the 60/40 portfolio, the Golden Butterfly and the Three-Fund Portfolio. Test them on decades of prices, then run them on paper or in your own Alpaca account.

## Key points

- A rebalancing bot sells some of what went up and buys what went down, back to your targets.
- It has no signals. It only keeps the mix you chose.
- The 60/40 template rebalances every month. The Golden Butterfly and the Three-Fund Portfolio rebalance once a year.
- In the backtests, all three mixes fell less than the S&P 500 in their worst crash, but all three lost money in 2022.
- You can change the funds, the weights and the schedule before you run it.

## What is portfolio rebalancing?

Rebalancing means trading a portfolio back to its target weights. Say your plan is 60% stocks and 40% bonds. After a strong year for stocks, you might hold 70% stocks. Rebalancing sells stocks and buys bonds until you are back at 60/40.

The point is to keep your risk where you chose it. Without rebalancing, a portfolio drifts toward whatever has risen most. A bot does this for you on a fixed date, so you never skip it or second-guess it.

## The three rebalancing bot templates

| Template | What it holds | Worst drawdown |
| --- | --- | --- |
| [60/40 portfolio](https://tactfolio.com/strategies/60-40-portfolio.md) | 60% SPY (US stocks), 40% IEF (Treasury bonds) | About 33% |
| [Golden Butterfly](https://tactfolio.com/strategies/golden-butterfly-portfolio.md) | 20% each in VTI, VBR, TLT, SHY and GLD | About 20% |
| [Three-Fund Portfolio](https://tactfolio.com/strategies/three-fund-portfolio.md) | 64% VTI (US stocks), 16% VXUS (world stocks), 20% BND (bonds) | About 28% |

A drawdown is how far a portfolio falls from its last high point. The worst drawdowns above come from each backtest that uses real ETF prices. For comparison, the S&P 500's worst drawdown was about 55% over the longer 60/40 and Golden Butterfly backtests, and about 34% over the Three-Fund backtest, which starts in 2011.

## How did these rebalancing bots do in the backtest?

All three mixes earned less than the S&P 500 and fell less. These figures come from each strategy's article. The 60/40 and Golden Butterfly figures were measured on prices through September 25, 2026, and the Three-Fund figures through October 15, 2026.

- **60/40 portfolio.** From mid-2002 it returned about 8% a year, against 11% for the S&P 500. In 2008 it lost 18% while the S&P 500 lost 37%. In 2022 it lost 17%, nearly as much as the S&P 500, because stocks and bonds fell together.
- **Golden Butterfly.** From late 2004 it returned about 8% a year. In 2008 it lost about 5% while the S&P 500 lost 37%. In 2022 it lost 13%. It lagged most in strong stock years, gaining about 6% in 2013 while the S&P 500 rose 32%.
- **Three-Fund Portfolio.** From early 2011 it returned about 10.5% a year, against 14% for the S&P 500. Its worst drawdown was about 28%, in the COVID crash of 2020. In 2022 it lost about 18%, close to the S&P 500, because its bond fund fell too.

These are hypothetical backtests on past prices with a 0.05% cost on every trade. They are not a track record, and the future can look very different. Read [why past results mislead](https://tactfolio.com/docs/concepts/why-past-results-mislead.md) before you rely on any of them.

## How to run a rebalancing bot on Tactfolio

You can go from a template to a running bot in five steps.

1. **Open a template.** Open the [live 60/40 strategy](https://tactfolio.com/s/tactfolio/classic-60-40), the [live Golden Butterfly strategy](https://tactfolio.com/s/tactfolio/tyler-golden-butterfly) or the [live Three-Fund strategy](https://tactfolio.com/s/tactfolio/larimore-three-fund).
2. **Copy it to your account.** Sign up for free and copy the strategy. Your copy is yours to change.
3. **Change the mix if you want.** In the [builder](https://tactfolio.com/builder), swap a fund, change a weight, or pick a different rebalance schedule. The backtest reruns as you edit.
4. **Run it on paper.** In Trade, a paper account runs the bot with pretend money at real market prices and emails you a summary after each close.
5. **Connect Alpaca when you are ready.** Use your own Alpaca account, paper or live, with your own API keys. The bot trades only the starting balance you give it.

## When does a rebalancing bot struggle?

- **Stocks and bonds falling together.** When rates rise fast, as in 2022, bonds stop cushioning stock losses.
- **Strong stock markets.** A mix with bonds or gold trails an all-stock portfolio when stocks rise quickly.
- **Small accounts and frequent trades.** Each rebalance trades a little, and costs add up. Rebalancing less often trades less.

## Common questions

### What does a rebalancing bot do?

It trades your portfolio back to its target weights on a schedule. It sells some of what has grown too large and buys what has shrunk. It does not try to predict the market.

### How often should a portfolio be rebalanced?

Common choices are monthly, quarterly or yearly. The 60/40 template rebalances monthly. The Golden Butterfly and the Three-Fund Portfolio rebalance once a year. Rebalancing less often means fewer trades.

### Can I build my own rebalancing mix?

Yes. Start a blank strategy in the builder, add your funds inside a Weight block, set the percentages, and choose how often to rebalance. Then check the backtest before you run it.

### Is a rebalancing bot free?

Yes. Everything on Tactfolio is free while we build, including backtests, paper trading and running a bot in your own Alpaca account.

### Can a rebalancing bot use leveraged ETFs?

A strategy can hold leveraged and inverse ETFs like any other fund. These funds reset daily. Held for longer, their returns can differ a lot from the multiple in their name.

## The ideas behind this bot

- [Portfolio rebalancing](https://tactfolio.com/learn/portfolio-rebalancing.md): What portfolio rebalancing is, why a 60/40 mix drifts, calendar vs threshold methods, and how taxes and costs fit in.
- [Backtest a portfolio](https://tactfolio.com/trading-tools/backtest-portfolio.md): Backtest a portfolio of US stocks and ETFs. Enter tickers and shares, pick when to rebalance, and get the results with a link to share.
- [Risk parity](https://tactfolio.com/learn/risk-parity.md): Risk parity balances risk instead of dollars. See a simple stock and bond example, why funds use leverage, and what went wrong in 2022.
- [SPY: State Street SPDR S&P 500 ETF Trust](https://tactfolio.com/etf/spy.md): What SPY holds, its 0.0945% yearly fee, returns by year, its worst drop, and which Tactfolio strategies hold it.
- [IEF: iShares 7-10 Year Treasury Bond ETF](https://tactfolio.com/etf/ief.md): What IEF holds, its 0.15% yearly fee, returns by year, its worst drop, and which Tactfolio strategies hold it.
- [VTI: Vanguard Morningstar Total Stock Market ETF](https://tactfolio.com/etf/vti.md): What VTI holds, its 0.03% yearly fee, returns by year, its worst drop, and which Tactfolio strategies hold it.

## Sources

- [Golden Butterfly Portfolio](https://portfoliocharts.com/portfolios/golden-butterfly-portfolio/), Portfolio Charts, accessed 2026-10-16
- [Paper Trading](https://docs.alpaca.markets/docs/trading/paper-trading/), Alpaca, accessed 2026-10-16