Practical examples of ETFs for portfolio rebalancing examples investors actually use

Real examples of ETFs for portfolio rebalancing examples in a 60/40 portfolio

Let’s start where most investors live: a classic 60% stocks / 40% bonds portfolio. Instead of talking in the abstract, here are real examples of ETFs for portfolio rebalancing examples that a U.S.-based investor might use.

Imagine an investor whose core holdings are:

• U.S. stocks: Vanguard Total Stock Market ETF (VTI)
• International stocks: Vanguard Total International Stock ETF (VXUS)
• U.S. bonds: iShares Core U.S. Aggregate Bond ETF (AGG)

Suppose stocks rally hard over two years. VTI and VXUS surge, while AGG lags. The portfolio drifts to 75% stocks / 25% bonds—much riskier than the target. A simple example of ETF-based rebalancing:

• Sell a slice of VTI and VXUS.
• Use the proceeds to buy AGG.

No stock picking, no guessing. Just trading broad-market ETFs to restore the 60/40 split. This is one of the best examples of how ETFs turn rebalancing into a clean, low-friction process.

For U.S. investors, you can confirm broad characteristics of these funds (like market coverage and credit quality) using educational resources from sources such as the U.S. Securities and Exchange Commission’s investor materials: https://www.investor.gov/

Examples of ETFs for portfolio rebalancing examples across U.S. and international stocks

A lot of investors split stocks into U.S. and international. Here are examples of how that looks in practice.

Picture a portfolio with:

• 40% in U.S. stocks via VTI (total market)
• 20% in international stocks via VXUS
• 40% in bonds via AGG

After a year when the U.S. outperforms international markets, you might end up with something like:

• 47% VTI
• 17% VXUS
• 36% AGG

Now U.S. stocks are overweight, international stocks and bonds are underweight. A real example of ETF rebalancing:

• Trim VTI back toward 40%.
• Add to VXUS and AGG using the cash from VTI sales.

You never touch individual companies or individual bonds. The ETFs are your rebalancing tools.

Other widely used examples of ETFs for portfolio rebalancing examples between U.S. and international stocks include:

• SPDR S&P 500 ETF Trust (SPY) for large-cap U.S. exposure.
• iShares Core S&P Total U.S. Stock Market ETF (ITOT) as a total-market alternative to VTI.
• iShares Core MSCI Total International Stock ETF (IXUS) as another broad international option.

An investor might hold SPY for U.S. stocks and IXUS for international stocks, then rebalance by shifting dollars between the two when one region runs ahead of the other.

Bond-heavy examples of ETFs for portfolio rebalancing examples for pre-retirees

As investors get closer to retirement, they often tilt more heavily toward bonds. ETFs make that shift—and the ongoing rebalancing—far easier.

Consider a 40-year-old who wants a 70% stock / 30% bond portfolio, gradually gliding to 50/50 by age 60. They might start with:

• 50% VTI (U.S. stocks)
• 20% VXUS (international stocks)
• 30% BND (Vanguard Total Bond Market ETF)

Every year, they:

• Direct new contributions more heavily into BND.
• Trim VTI and VXUS if stocks rally too far above their targets.

By age 50, they might target 60% stocks / 40% bonds. Their ETF mix might evolve to:

• 40% VTI
• 20% VXUS
• 40% BND

In this example of ETF-based rebalancing, the investor doesn’t need to pick individual bonds or worry about reinvestment risk. BND holds a wide range of U.S. investment-grade bonds, and the investor simply uses it as the “bond lever” in their portfolio.

This type of approach aligns with many guidelines you’ll see in retirement-planning research from sources like the U.S. Department of Labor’s retirement resources: https://www.dol.gov/general/topic/retirement

Factor and style tilt examples of ETFs for portfolio rebalancing examples

Some investors go beyond market-cap indexes and use factor or style ETFs—value, growth, small-cap, quality—to fine-tune risk and return. Here are examples of ETFs for portfolio rebalancing examples in that context.

Imagine a core portfolio:

• 40% VTI (core U.S. total market)
• 20% VXUS (core international)
• 40% AGG (core bonds)

The investor wants a mild value tilt and a bit more small-cap exposure. They add:

• 10% iShares MSCI USA Value Factor ETF (VLUE)
• 10% iShares Core S&P Small-Cap ETF (IJR)

Now, during a year when small caps and value stocks outperform, VLUE and IJR might surge. The portfolio drifts away from its intended tilt and becomes too concentrated in those factors.

A real example of ETF rebalancing:

• Trim VLUE and IJR back to their 10% targets.
• Reallocate the excess into VTI, VXUS, or AGG, depending on which side is underweight.

In other words, factor ETFs become knobs you can dial up or down. Rebalancing keeps those tilts intentional instead of accidental.

For investors who want to study factor investing further, academic and educational resources from institutions like the CFA Institute can be helpful: https://www.cfainstitute.org/en/research

Target-date and all-in-one ETF examples of for portfolio rebalancing

Some investors don’t want to manage the rebalancing themselves. That’s where target-date and all-in-one asset allocation ETFs come in. These funds rebalance internally, but you can still use them as part of a broader rebalancing plan.

Examples include:

• Vanguard Target Retirement 2045 Fund (mutual fund example, but conceptually similar to target-date ETFs) that automatically shifts from stocks toward bonds as the target date approaches.
• iShares Core Growth Allocation ETF (AOR), which holds a mix of stock and bond ETFs and rebalances to a growth-oriented target allocation.
• iShares Core Conservative Allocation ETF (AOK), with a heavier bond allocation.

An investor might:

• Use AOR as the core holding for long-term growth.
• Pair AOR with AOK to fine-tune risk.

If markets fall and stocks drop faster than bonds, AOR will rebalance internally toward its target mix. The investor can then rebalance between AOR and AOK at the account level to maintain their own overall risk target. This is a layered example of ETFs for portfolio rebalancing examples working both inside the fund and at the portfolio level.

Inflation and risk-hedge examples of ETFs for portfolio rebalancing examples

Rebalancing isn’t just about stocks and nominal bonds. Some investors add inflation hedges or diversifiers, then use ETFs to keep those positions sized appropriately.

Common examples of ETFs for portfolio rebalancing examples in this category include:

• iShares TIPS Bond ETF (TIP) for Treasury Inflation-Protected Securities.
• Schwab U.S. TIPS ETF (SCHP) as another TIPS option.
• SPDR Gold Shares (GLD) or iShares Gold Trust (IAU) for gold exposure.

Imagine a portfolio:

• 50% stocks (VTI + VXUS)
• 35% nominal bonds (AGG or BND)
• 10% TIPS (TIP or SCHP)
• 5% gold (GLD or IAU)

During an inflation scare, TIPS and gold might spike while nominal bonds lag. Without rebalancing, the portfolio could drift to:

• 48% stocks
• 28% nominal bonds
• 14% TIPS
• 10% gold

A disciplined investor might:

• Trim TIP and GLD back to 10% and 5%.
• Add to nominal bonds or stocks, whichever is underweight.

Again, the ETFs are the tools. You’re not buying individual TIPS or bullion; you’re moving between ETF sleeves to keep the risk profile aligned with your plan.

For background on TIPS and inflation, the Federal Reserve’s education pages are a useful reference: https://www.federalreserve.gov/education.htm

Tax-aware examples of ETFs for portfolio rebalancing examples in taxable accounts

In taxable brokerage accounts, rebalancing with ETFs requires more nuance because of capital gains taxes. Here’s an example of how investors often handle it.

Assume a taxable portfolio:

• 50% VTI (large unrealized gains)
• 20% VXUS (moderate gains)
• 30% MUB (iShares National Muni Bond ETF) for tax-exempt income

VTI rallies, and the portfolio drifts to 60% VTI, 18% VXUS, 22% MUB. Selling VTI would trigger a big tax bill. Instead, a tax-aware example of ETF rebalancing might be:

• Direct all new contributions and dividends into MUB and VXUS.
• Use tax-loss harvesting opportunities in other ETFs to offset any necessary VTI sales.

If the investor holds similar but not “substantially identical” ETFs, they can also rebalance by swapping between them. For example, trimming ITOT and buying VTI, or vice versa, while staying mindful of wash-sale rules and tax guidance from the IRS: https://www.irs.gov/

This is where ETFs shine: they’re liquid, diversified, and usually very tax-efficient, giving you more flexibility in how you rebalance.

How often to use these examples of ETFs for portfolio rebalancing

All these examples of ETFs for portfolio rebalancing examples raise a very practical question: how often should you actually do this?

Two common approaches:

• Calendar-based rebalancing: Review your portfolio on a fixed schedule—say, once or twice a year—and use your chosen ETFs (VTI, VXUS, AGG, BND, TIP, etc.) to bring allocations back to target.
• Threshold-based rebalancing: Only rebalance when an asset class drifts more than a set band, such as 5 percentage points away from target.

Many investors combine the two: they check quarterly but only trade if something is outside their chosen band. ETFs make this easy, because you can trade in dollar amounts, quickly, without worrying about odd-lot bonds or obscure individual stocks.

The right frequency depends on your taxes, transaction costs, and tolerance for drift. But in all cases, the mechanics are similar: identify what’s overweight, identify what’s underweight, and use ETFs as the levers to move the portfolio back into line.

FAQ: examples of ETF use in rebalancing

Q: What is a simple example of using ETFs for portfolio rebalancing?
A: A very simple example is a 60/40 portfolio using VTI for U.S. stocks and BND for bonds. If stocks rally and you end up at 70/30, you sell some VTI and buy BND until you’re back near 60/40. That’s one of the cleanest examples of ETFs for portfolio rebalancing examples in practice.

Q: Which ETFs are common examples of core holdings for rebalancing?
A: Common core examples include VTI or ITOT for U.S. stocks, VXUS or IXUS for international stocks, and AGG or BND for U.S. investment-grade bonds. Many investors then layer in TIP or SCHP for inflation protection and MUB or other municipal bond ETFs in taxable accounts.

Q: Are target-date funds a good example of ETFs for portfolio rebalancing?
A: Target-date funds and allocation ETFs are classic examples of built-in rebalancing. They hold baskets of stock and bond ETFs and adjust the mix automatically as you approach a target year or risk level. You can still rebalance at the account level by pairing a growth-oriented allocation ETF with a more conservative one.

Q: Can I rebalance only with new contributions instead of selling ETFs?
A: Yes. Many investors in taxable accounts prefer to use new contributions and dividends to rebalance, especially when they have large unrealized gains. They direct new cash into underweight ETFs (for instance, bonds after a stock rally) and avoid selling unless allocations drift too far.

Q: Where can I learn more about portfolio rebalancing and ETF risks?
A: For general investing education, the SEC’s Investor.gov site (https://www.investor.gov/) and the Federal Reserve’s education pages (https://www.federalreserve.gov/education.htm) are good starting points. They explain investment risks, diversification, and how funds work, which helps you evaluate your own examples of ETFs for portfolio rebalancing examples more critically.