10 Best ETFs for Rebalancing in 2025

Is rebalancing in 2025 a must-do for all investors?

US stocks, as measured by the Morningstar US Market Index, have trounced US bonds and international stocks over the trailing one-, three-, and five-year periods ended Feb. 12, 2025. As a result, investors may find their portfolios are heavier in US stocks and lighter in bonds and international stocks than they should be.

Moreover, many investment experts are forecasting international stocks—and in some cases, even bonds—to outperform US stocks during the next several years.

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 a pressing need to rebalance. But for investors within 10–15 years of retirement, rebalancing is more important.

If you already own a solid bond or international-stock exchange-traded 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 looking to add a bond or international stock ETF to your portfolio, here are some of the best ETFs to invest in.

7 of the Best Bond ETFs for Rebalancing in 2025

The best bond ETFs for rebalancing land in either the intermediate core bond or the intermediate core-plus bond Morningstar Category and earn our highest Morningstar Medalist Rating of Gold with 100% analyst coverage as of Feb. 13, 2025.

1. Fidelity Total Bond ETF FBND
2. iShares Core Total USD Bond Market ETF IUSB
3. iShares Core US Aggregate Bond ETF AGG
4. iShares Total Return Active ETF BRTR
5. Schwab US Aggregate Bond ETF SCHZ
6. SPDR Portfolio Aggregate Bond ETF SPAB
7. Vanguard Total Bond Market ETF BND

Those looking for the best bond ETFs for rebalancing should begin their search with highly rated ETFs in the intermediate core bond or intermediate core-plus bond categories. 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 3.0-year average effective duration of the Morningstar US Core Bond Index. The difference is that ETFs in the core-plus category have more flexibility to own noncore bonds, such as corporate high-yield, bank-loan, and emerging-markets debt. ETFs 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 ETF categories. If you’re investing in a taxable account and you’re in a high tax bracket, for instance, a municipal-bond ETF 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 ETF or an ETF that invests in inflation-protected securities.

3 of the Best International ETFs for Rebalancing in 2025

The best international-stock ETFs for rebalancing land in the foreign large-blend category and earn our highest Medalist Rating of Gold with 100% analyst coverage as of Feb. 13, 2025.

1. iShares Core MSCI Total International Stock ETF IXUS
2. Vanguard FTSE All-World ex-US ETF VEU
3. Vanguard Total International Stock ETF VXUS

When it comes to the best international ETFs to invest in when rebalancing, we suggest using a well-diversified, large-cap-focused stock ETF as the core; you’ll find such ETFs in the foreign large-cap blend category. Foreign large-cap ETFs 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 ETFs 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 highly rated ETFs in the foreign large-growth and foreign large-value categories. There are also highly rated international stock ETFs that focus exclusively on mid- and small-cap companies or emerging-markets stocks.

Should You Rebalance Your Portfolio in 2025?

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.com subscribers can use our portfolio tool to find out.