Rebalancing Your Canadian Portfolio: When and How
Rebalancing is the process of realigning your investment portfolio back to its original target allocation after market movements have shifted it — selling what has grown too large and buying what has fallen behind.
Suppose you set a target of 80% equities and 20% bonds across your TFSA and RRSP. After a strong year in stocks, your portfolio drifts to 90/10. You are now taking on more risk than intended. Rebalancing means selling some equities and buying bonds to return to 80/20.
Without rebalancing, your portfolio gradually takes on more risk during bull markets and becomes overly conservative after crashes. Rebalancing enforces 'buy low, sell high' discipline without requiring market predictions.
Canadian tax advantage: rebalancing inside a TFSA or RRSP triggers no taxable events. This is a significant benefit over non-registered accounts, where selling to rebalance may trigger capital gains tax. Whenever possible, rebalance within registered accounts first.
If you use an all-in-one ETF like VBAL, VGRO, or XEQT, rebalancing is handled automatically by the fund manager — one of the key advantages of these products. You never need to think about it.
For multi-ETF portfolios, two common approaches: calendar rebalancing (review annually) or threshold rebalancing (act when any asset class drifts more than 5% from target). Using new contributions to 'buy the laggard' is the most tax-efficient rebalancing strategy in non-registered accounts.
Richify Tip
Richify's AI agents monitor your portfolio's drift and flag when rebalancing may be appropriate — helping you stay aligned with your risk strategy without constant manual tracking.
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