As 2025 winds down, investors are taking notice of what performed, what didn’t, and what needs adjusting going into 2026. Market conditions have shifted, inflation and interest rates have changed, and several factors are now rotating back in favour. This makes it an ideal time to rebalance your portfolio for 2026.
There’s no single “right way” to rebalance, but there are some proven strategies that can help strengthen your portfolio for the new year. Here’s a look at some of those approaches.
Diversification is key
Seasoned investors often emphasize diversification. It’s a key concept that comes down to risk mitigation. If you put all your money into a single investment and it fails, you’re left with a fraction of your initial outlay.
Instead, diversifying across different segments of the market, or even geographies, can help to mitigate that risk.
One great example of diversification is Bank of Nova Scotia (TSX:BNS). Scotiabank is one of Canada’s big bank stocks. The bank is known for generating a reliable and recurring revenue stream and paying a healthy, growing dividend.
But more importantly, the bank has a diversified growth stream with operations not only in Canada but in multiple markets around the world. In fact, Scotiabank has even earned the nickname “Canada’s most international bank.”
The stable domestic market at home generates a stable revenue stream that leaves room for investments in growth and the bank’s robust quarterly dividend.
In contrast, the international segment has turned its growth focus away from developing Latin American markets to the more mature markets in North America.
The result is a stellar investment that has paid dividends for over a century and continues to see strong long-term growth appeal.
For those investors who are not already invested in a big bank and looking to rebalance before 2026, Scotiabank is hard to ignore.
Sprinkling some dividends (and defence) into your portfolio
Defensive stocks are those that provide a product or service with constant demand, largely immune to market fluctuations. Great examples of this include grocers, utilities, and energy stocks.
That reliable, stable revenue stream also means that defensive stocks often offer some of the best dividends on the market.
If you’re looking at defensive stocks to rebalance your portfolio, one option to consider is Fortis (TSX:FTS). Fortis is a utility stock with a massive portfolio that includes operations in Canada, the U.S., and the Caribbean.
The company generates a recurring revenue stream from long-term contracts, enabling it to pay a handsome dividend. Fortis has paid out that dividend without fail and provided annual increases for 51 consecutive years.
As of the time of writing, the yield on that quarterly dividend is an appetizing 3.58%.
That’s a defensive, diversified pick that every portfolio needs.
Leaving the old, buying the new
If you’re looking to rebalance your portfolio, this is one of the harder lessons. No investor willingly goes into a trade thinking that a stock will drop. But when it does happen, an even more pressing question arises. Should I hold or sell and move on to other opportunities?
That’s the question investors face with BCE (TSX:BCE). The stock has dropped over 40% in the trailing five-year period. The one-time dividend darling has also slashed its dividend in an effort to reduce costs.
That dividend cut made the payout more sustainable. BCE also invested in new areas and markets while paying down some of its debt. The stock has even shown signs of recovery over the trailing six-month period.
But that question remains: “Is there a better potential return to be made elsewhere?”
Sometimes that answer is yes. Selling can free up cash for stronger opportunities and even provide tax loss harvesting benefits.
Are you ready to rebalance your portfolio?
No stock is without risk. That includes defensive gems with otherwise stable, reliable business models that span decades.
That’s why diversifying, picking the right stocks for growth or income, and knowing when to sell are key parts of rebalancing your portfolio.
A thoughtful rebalance today can set the stage for stronger returns, smoother performance and a more resilient portfolio in the year ahead.
It’s time to rebalance your portfolio.
