How to Rebalance Your Portfolio in Mid-2026: The Best Funds to Buy

We’ve reached the midpoint of 2026. At the broad asset-class level, US stocks have put up solid year-to-date returns, despite worries about war, inflation, valuations, and the risk artificial intelligence may pose to various industries. Meanwhile, US bond returns have been limited due to sticky inflation and expectations that interest rates could remain higher for longer—though bonds do deserve props for providing diversification during periods of stock market stress this year. And international stocks have continued to one-up their US counterparts in 2026 as they did last year.

Large-growth US stocks bounced back strongly in April and May after a tough first quarter, but then pulled back again in June. As a result, the year-to-date winners through June 26 are−surprise!—small-cap stocks. Both small-growth and small-value stocks have outperformed their large-cap counterparts this year.

Should You Rebalance Your Portfolio in Mid-2026?

Investors with long runways to draw down from their investment portfolios—say, those with 25 or more years before they plan to retire—may not have the same pressing need to rebalance their portfolios in mid-2026 as those within 10-15 years of retirement.

“The main reason for rebalancing is to control risk, not necessarily to improve returns,” reminds Morningstar portfolio strategist Amy Arnott. “If you’re a young investor, you’re saving for retirement that’s a couple of decades down the road, you might want to take more of a hands-off approach to rebalancing and check in occasionally, but don’t worry about making portfolio changes unless your asset mix changes significantly from your target levels. As you get older, you have a much smaller margin of safety as you are leading up to retirement and then actually in retirement. In that case, it’s definitely important to rebalance on a regular schedule and make sure your portfolio is on track.”

Those who’d like to rebalance their portfolios in mid-2026 should be focused on one thing in particular: bonds.

If you haven’t rebalanced your portfolio recently, you’re likely heavier in stocks relative to bonds than you should be. Both US and non-US stocks have significantly outperformed bonds not just this year, but during the past several years, too.

If you already own a solid bond exchange-traded fund or mutual fund, it may make the most sense for you to restore balance by jettisoning some dollars from elsewhere in your portfolio to these existing holdings rather than initiating new positions. But if you’re in the market for a good bond ETF or mutual fund to balance your investment portfolio, here are some of the best funds to invest in.

How to Build the Bond Core of Your Portfolio

The role of bonds in a portfolio isn’t returns—it’s stability.

10m 5s Jun 3, 2026

Watch

The Best Bond Funds for Rebalancing Now

The best bond funds for rebalancing investments in mid-2026 land in either the intermediate core bond or the intermediate core-plus bond

and have at least one share class that earned our highest of Gold with 100% analyst coverage. All data is as of June 29, 2026.

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 3.0-year average effective duration of the Morningstar US Core Bond Index. The difference is that core-plus funds have more flexibility to own noncore bonds, such as corporate high-yield, bank-loan, and emerging-market 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.

Prefer to get your fixed-income fix via an ETF? No worries—there are many Gold-rated ETFs in the core and core-plus categories, too.

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.

Should You Rebalance Your Portfolio by Style in Mid-2026?

Even if your broad asset mix is where it should be, you may find that your subasset classes may need some refining.

While US large-growth stocks have lagged in 2026, they’ve outperformed value stocks and smaller companies by a significant margin during the past several years.

Not sure if your portfolio’s asset allocation is out of whack? Morningstar Investor subscribers can use our portfolio tool to find out. If you find that your exposure to US large-growth stocks is greater than you’d like, review one of our other best funds lists to find options to restore balance.