# Rebalancing example

### The Thermostat Analogy

Imagine your home thermostat:

* You set the temperature to **20°C** (your target)
* You accept a margin of **±2°C** (your threshold)
* Heating only turns on if it drops below **18°C**
* AC only kicks in if it goes above **22°C**

Between 18°C and 22°C? Nothing happens, you're in the comfort zone.

**Same for your bundle**: you set a target and a margin, and it only rebalance when you exit the zone.

### Threshold ≠ Price Change

{% hint style="danger" %}
**The threshold is NOT the same as the asset's price movement on the market.**
{% endhint %}

If an asset goes **+5% on the market**, it does NOT mean it goes **+5% in your bundle**.

The threshold measures the asset's **weight** in your portfolio, not its price change. Because your other assets also move, the actual price change needed to trigger rebalancing is much larger.

### Practical Example

**Initial Setup:**

* Total bundle: **$1,000**
* Asset A: **$200** (target 20%)
* Threshold: **5%**
* Rebalancing zone: **15% to 25%**

#### If the asset rises on the market

Asset A gains **+33%** in value → $266

|                |                                          |
| -------------- | ---------------------------------------- |
| Bundle value   | $266 + $800 = **$1,066**                 |
| Asset A weight | $266 ÷ $1,066 = **25%**                  |
| Result         | ⚠️ Above 25% → **Rebalancing triggered** |

#### If the asset drops on the market

Asset A loses **-29%** in value → $141

|                |                                          |
| -------------- | ---------------------------------------- |
| Bundle value   | $141 + $800 = **$941**                   |
| Asset A weight | $141 ÷ $941 = **15%**                    |
| Result         | ⚠️ Below 15% → **Rebalancing triggered** |

#### In between?

Asset goes +10% or -15%? **Nothing happens**, you stay in the comfort zone.


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