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Will a donation cause rebalancing in my account?

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Donations of shares from your Betterment account typically will result in a decrease of one or more asset classes, depending on the shares our charitable donation selection algorithm selects to transfer. The algorithm prioritizes maximal tax benefit over the best allocation outcome, which can introduce allocation drift to your account, similar to when markets move your holdings in different directions. Because of this, our rebalancing algorithm, which checks your account daily, may seek to rebalance your account after the donation completes. There are two things to be aware of:

  1. You can avoid a rebalance by making a deposit equal to the amount of your donation right after you complete your donation. This helps keep your allocation and goal on track. The resulting portfolio has a higher cost basis (i.e. lower embedded tax) than if you didn’t make a donation from the account.
  2. If a rebalance does occur, it will use our TaxMin lot sorting algorithm, which sells losses before gains, followed by long term gains. It also avoids short-term gains, and selects the lowest long term gains first. So if a rebalance does occur, the tax impact of it can be minimized.