2 Smart ETF Moves to Help Rebalance by Year’s End

Sprott Physical Gold Trust (TSX:PHYS) and another ETF to help bring balance back to your TFSA.

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Key Points
  • If the TSX rally left you overweight in certain sectors, rebalance into diversified ETFs to reduce risk and shore up underexposed areas.
  • Consider Sprott Physical Gold Trust (PHYS) as a hedge against market shocks and BMO Equal Weight Canadian Banks (ZEB) for balanced Big‑Six bank exposure and income.

The bull market seems difficult to stop in its tracks, even as the TSX Index runs over a few bumps in the road to close off the year. Either way, I think it makes sense to take a step back and rebalance things a bit if the latest surge in the market has left you overexposed to some sectors (think the financials or materials, which have done well this year) and underexposed to others (especially tech if you’re too heavy in Canadian stocks). In any case, rebalancing doesn’t have to be a difficult chore. And, in many instances, it might not even be necessary if you’re fine with where things stand with sectors you’re overweight in.

Of course, tremendous strength could end in some sort of painful correction, and as an investor, it’s always important to manage through such risks. In any case, this piece will focus on a few quick and easy ETF pick-ups that might be able to rebalance your TFSA (Tax-Free Savings Account) or any other account that may be overdue for a bit of a tune-up, so to speak.

As always, rebalancing is a personal decision rather than a rule to be followed. If you’ve found that valuations and volatility levels in some of your top holdings are above your comfort zone, rotating some profits into a more diversified ETF could be the move to make. Without further ado, let’s check in with a few ETFs I’d have at the top of my list if I were to move things around to achieve greater balance and perhaps a lower risk profile going into 2026.

ETF is short for exchange traded fund, a popular investment choice for Canadians

Source: Getty Images

Sprott Physical Gold Trust

First up, we have the Sprott Physical Gold Trust (TSX: PHYS), one of the better Canadian physical gold ETFs out there. Undoubtedly, it has been a scorching run for gold, but the good times might not be over. And if you’re like many investors who are underexposed to the shining metal, I think it’s not too late to add some exposure going into the new year, which may very well be full of shockers and surprises that drive the precious metal higher.

Apart from central bank buying and macro headwinds, I find gold to be a terrific asset to own in the face of a market correction or bear market moment. Indeed, whenever you have an asset that can steady the ship (think your TFSA) when a hurricane moves through, you might wish to keep adding to it on dips. Though gold still isn’t cheap, I wouldn’t be against buying a small portion here, especially if you’re not yet correction-ready with your holdings.

BMO Equal Weight Canadian Banks ETF

When it comes to quick rebalancing, the thematic ETFs are more than worth considering. At this juncture, I like the BMO Equal Weight Canadian Banks (TSX: ZEB), which is a low-cost way to bet on Canada’s Big Six banks. The banks have been really enjoying a comeback year. And if I had to guess, there’s more strength to be had in the new year, as headwinds continue to fade and tailwinds look to strengthen.

It’s hard to pick just one of the big bank stocks to buy, so if you’re looking to beef up on the financials, the ZEB stands out as a one-stop shop kind of option. You’re owning the broad basket of banks in an ETF that rebalances itself every so often to maintain an equal weighting. With a 3.3% yield and a very simple mix, the ZEB stands out as a must-watch if you’re not as invested in the banks as you’d wish.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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