Is rebalancing during 2024 a must-do for all investors?
US stocks, as measured by the Morningstar US Market Index, continue to trounce US bonds and international stocks so far in 2024 and over the trailing three- and five-year periods ended May 17, 2024. As a result, investors may find their portfolios are heavier in US stocks and lighter in bonds and international stocks than they should be.
Investors with longer runways to drawing down from their portfolios—say, those with 25 or more years before they plan to retire—may not have the same pressing need to rebalance as those who are getting within 10 to 15 years of retirement.
If you already own a solid bond or international-stock exchange-traded fund or mutual fund, it may make the most sense for you to jettison some dollars from elsewhere in your portfolio to these existing holdings rather than initiate new positions. But if you’re in the market for a bond or international-stock ETF or mutual fund, here are some of the best funds to invest in.
17 Best Bond Funds for Rebalancing in 2024
The best bond mutual funds and ETFs for rebalancing land in either the intermediate core bond or the intermediate core-plus bond Morningstar Category and have at least one share class that earned our highest Morningstar Medalist Rating of Gold with 100% analyst coverage as of May 17, 2024.
- American Funds Bond Fund of America ABNDX
- Baird Aggregate Bond BAGSX
- Baird Core Plus Bond BCOSX
- BlackRock Total Return MDHQX
- BlackRock Total Return ETF BRTR
- Dodge & Cox Income DODIX
- Fidelity Investment Grade Bond FBNDX
- Fidelity Total Bond FTBFX
- Fidelity Total Bond ETF FBND
- iShares Core Total USD Bond Market ETF IUSB
- iShares Core US Aggregate Bond ETF AGG
- JPMorgan Core Bond JCBUX
- JPMorgan Mortgage-Backed Securities JMBUX
- Loomis Sayles Core Plus Bond NEFRX
- PGIM Total Return Bond PTRQX
- Vanguard Total Bond Market ETF BND
- Vanguard Total Bond Market Index VBTIX
Those looking for the best bond funds for rebalancing should begin their search with highly rated funds in the intermediate core bond or intermediate core-plus bond categories. Mutual funds and ETFs in both categories invest largely in investment-grade US fixed-income issues, including government, corporate, and securitized debt; they usually maintain durations that range from 75% to 125% of the three-year average effective duration of the Morningstar US Core Bond Index. The difference: Core-plus funds have more flexibility to own noncore bonds, such as corporate high-yield, bank-loan, and emerging-markets debt. Funds in both categories therefore provide a lot of diversification in a single holding, and as a result, they don’t court excessive interest-rate or credit risk.
Of course, investors can expand their reach beyond these two bond-fund categories. If you’re investing in a taxable account and you’re in a high tax bracket, for instance, a municipal bond fund might be a better fit for you. Or if you’re in retirement or on the precipice of it, you might be in the market for a shorter-term bond fund or a fund that invests in inflation-protected securities.
13 Best International Funds for Rebalancing in 2024
The best international-stock mutual funds and ETFs for rebalancing all land in the foreign large-blend category and have at least one share class that earned our highest Morningstar Medalist Rating of Gold with 100% analyst coverage as of May 17, 2024.
- American Funds International Growth and Income IGAAX
- Artisan International Value ARTKX
- Dimensional International Core Equity Market ETF DFAI
- Fidelity Total International Index FTIHX
- iShares Core MSCI Total International Stock ETF IXUS
- JPMorgan International Equity JIERX
- JPMorgan International Focus IUEFX
- MFS International Equity MIEIX
- State Street Global All Cap Equity ex-US Index SSGVX
- Vanguard FTSE All-World ex-US ETF VEU
- Vanguard FTSE All-World ex-US Index VFWAX
- Vanguard Total International Stock ETF VXUS
- Vanguard Total International Stock Index VGTSX
When it comes to the best international funds to invest in when rebalancing, we suggest using a well-diversified, large-cap-focused stock mutual fund or ETF as the core; you’ll find such funds in the foreign large-cap blend category. Foreign large-cap funds tend to focus on Europe, specifically established markets in France, Germany, Switzerland, the Netherlands, Spain, Italy, and the UK. They often hold significant positions in Asia as well. And although they dabble in emerging-markets stocks, they often cap their exposure to those markets to about 15% of assets. Those funds in the foreign large-cap blend category invest in stocks with both growth and value characteristics.
Here, too, investors can expand their search beyond this single international-stock category if they so choose. For instance, those who’d prefer to manage their exposures to growth and value stocks abroad will find several highly rated funds in the foreign large-growth and foreign large-value categories. There are also top-rated international-stock funds that focus exclusively on mid- and small-cap companies or emerging-markets stocks.
Should You Rebalance Your Portfolio in 2024?
Even if your broad asset mix is balanced, you may find that your subasset classes may need some work. Perhaps your allocation to smaller-company stocks is less than you want it to be. Or you’re unintentionally favoring growth styles over value styles—or vice versa. Not sure if your portfolio’s asset allocation is out of whack? Morningstar Investor subscribers can use our portfolio tool to find out.
