How do you rebalance your portfolio?

How do I rebalance my portfolio?

I receive a number of emails every month about my approach to saving and investing. One of them is:

How do I rebalance my portfolio?

I’ll be the first person to acknowledge my investment strategies are not perfect but I feel, over time, the plan is very good and the plan is working for us. 

Here are some recent questions I received and my answers to them.

Reader: I recently read you want to have more “core” for your “explore”.  What does this mean?

You are probably referring to these posts and page where I shared some of my favourite ETFs:


For us more “core” means a higher percentage of indexed ETFs in our registered accounts over time and relying less on dividend paying stocks in those accounts going forward.

Given I have no idea what the future holds I think my best bet for a successful financial future is consistent saving, a broad diversification in stocks, and keeping my investment costs super low.

That means keeping the stocks I own for passive income but also making contributions into indexed ETFs for total equity market returns and extra diversification over time. 

You can read about the dividend paying stocks I own for income and growth here.

You can read about my favourite low-cost ETFs to own here. 

Reader: Since you are embracing indexing more are you going to sell your dividend paying stocks, including those in your taxable account over time?

Heck no!

Not near term. 

Largely thanks to the Canadian dividend tax credit along with the fact we are sitting on some very large capital gains, I have no intention of selling my stocks inside our taxable account.

I am making use of the dividend tax credit in my taxable account and likely always will.

I have no short-term plans to sell any of our dividend paying stocks inside that account in particular.

Besides I like writing my juicy dividend income updates! 

I will be relying on some passive income from our investments to help fund our retirement lifestyle. I think we have an outside shot of earning close to $20,000 per year from our non-registered portfolio alone in the coming years. 

Reader: How do you rebalance your portfolio, of Canadian stocks?

Good question!

I try and rebalance my portfolio by buying new/,more Canadian assets that have been beaten up in price to get back to my personal targets.

I use the breakdown of the TSX 60 or whatever iShares ETF XIU holds in various sector weights as a guide for my Canadian portfolio with a few caveats:

  1. While the TSX Index has had a long-term sector breakdown of many financials and energy stocks, I try and ensure no one sector has more than 20% weight. The only exception to this might be Canadian financials. I own all Big-6 banks and the top life insurance companies. 
  2. I believe it’s best to own more telcos and utilities in my portfolio than XIU given a) the long-term / juicy dividend histories of those companies and b) the fact they can and do increase prices to hedge inflation. 

Looking at XIU as a proxy then for my own Canadian portfolio guidance:

  • I would own <30% in the financial sector.
  • I would own <20% in the energy sector (think Enbridge, Suncor and a few more).
  • I would own up to 20% tech or any other sector via a low-cost indexed fund for simplicity. 
  • I would own some industrials given these are stable, recession-proof companies (think railroads (CNR) and waste management (WCN)) in my taxable account. 

I have a bias to low-volatility stocks in my portfolio so I tend to own more telecommunications and utilities than the TSX would weigh near the top right now.

Check out low-cost ETF ZLB from BMO for a good fund to own and/or stocks to own in your stock portfolio.

To sum up, I tend to own BCE, Telus, Emera, Fortis and a few other companies in greater weights than the current ETF XIU would as part of its top holdings. Again, I do that for juicy dividends AND lower-volatility. 

Finally, I try to maintain a 5% rule.

Meaning, I try to have no more than 5% of my total portfolio value in any one stock to reduce individual stock risk.

From time to time, do I let a few winners run?

Yes, for sure, but generally speaking I try and stick to my “5% rule” to manage portfolio risk and might be concerned if some stocks approach 10% of my overall portfolio. 

What about rebalancing my U.S. assets? Other parts of the portfolio?

I don’t worry about rebalancing my U.S. assets or other assets very much, if at all, I just buy more indexed ETFs over time when I have enough money to do so inside my RRSP or TFSA.

I don’t hold any bonds any longer in my personal portfolio – for this reason – although some investors might disagree with this approach.

I have learned to celebrate falling prices and I think you should too although I can appreciate this is unconventional thinking.

How do I rebalance my portfolio summary

In the end, I believe investors will be successful if they can do the following things:

  1. keep a modest and consistent savings rate,
  2. keep their fees low (passive or actively managed), 
  3. diversify across sectors, companies and countries as much as possible. Just keep buying. 

If you do this via stock selection, great.

If you do this via indexed investing, maybe even better because it’s easier for most investors to invest this way and they will make less investing mistakes by indexing. 

As you invest more and learn more, consider thinking about your assets as a single portfolio, a portfolio that spans multiple investing accounts and even includes your pension if you are lucky enough to have one. 

Thanks for reading and keep the questions coming everyone. 


My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

18 Responses to "How do you rebalance your portfolio?"

  1. I don’t do much re-balancing. I have weightings in some stocks (26% and 11%) that many counsel against. If I like a stock, I usually buy and hold it for a long time. I don’t focus on the value of my portfolio but rather the “income” it produces now, and can produce in the future. Case in point, over the last couple of days the overall value is probably down over 15K but the income is unchanged. Furthermore, BAM will be DRIPped at a lower price therefore increasing yield. Once again though, we do have two indexed DB plans for our pensions.

    1. Hey Lloyd, this is where we focus as well – I care about cash flow vs. portfolio value. My portfolio value since the start of the year is down but my monthly cash flow is up. This is why I’m not totally sold on a total return approach; I’m biased to my hybrid approach that uses the best of both worlds: dividends and capital appreciation using ETFs.

      If you have two indexed DB plans for your pensions; you are largely set! 😉

  2. I don’t understand why some keep on defending bonds while the numbers say it all! I prefer dividends over indexed, but I understand why you want some. Could be a good move for many.

    1. Bonds are “parachutes for portfolios” to paraphrase Andrew Hallam. They cushion the blow when the stock market tanks. If you need the capital to live from then this cushion is likely essential. If you have enough capital or passive income, and you can manage your behaviour accordingly, I really don’t see the need for bonds myself as part of a long-term financial plan. Especially at these interest rates.

  3. Hi Mark,
    In my opinion, if you are afraid to sell a stock or reduce a position which has become too large, then you are not managing your portfolio at all.
    I believe you need hard and fast rules (in writing) to manage a stock portfolio. This is one area that DIY investors are totally lacking.
    Personally, I can own a maximum of 39 stocks at any one time, although I follow approximately 50 stocks. Each position must be a minimum of 2% and a maximum of 4% of my stock portfolio. If the position goes above 4% I sell enough to get me back to 3%. If it drops below 2% I must re-evaluate the stock to see if it is worth keeping in the portfolio. If it is, I must purchase enough stock to bring me back to more than 2%. If it is no longer a good investment it is sold.
    I have found over the years that this helps me buy low and sell high as stocks go up and down. In addition, no 1 stock is too large of a position to hurt me too badly and it stays large enough to be meaningful.
    Many investors use 5% minimum and 10% maximum. I feel this too wide and prefer the smaller range.
    I also have rules to keep my sector allocation in balance.
    Just my way of dealing with a tough problem of rebalancing.

    1. Thanks again for writing John. There is more work associated with my portfolio than what I wrote, although not much. In terms of selling, I don’t since that incurs costs so to help the rebalancing act I simply buy. I also use an approximate 5-7% maximum for any one holding and I make sure that holding never exceeds the % held by my indexed ETFs.

  4. I never liked the idea of selling, I have been re-balancing by buying more funds. Have a re-balance spreadsheet helps me determining which fund and how many shares I need to buy.

  5. I rebalance my portfolio as I make new purchases. I never purposely buy and sell to rebalance. I maintain 20 – 30 stocks diversified across sectors. I hold all stocks & REITS. I don’t like “funds” of any type. Time is on your side to reap the superior returns of stocks.

    1. Same John: I plan to buy and hold and keep and collect dividends and distributions for the rest of my life; 30-40 stocks across sectors and countries.

      I will use a couple of ETFs to diversify further.

      Again, I appreciate the comment!


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