Rebalance Your Portfolio in 2026: Key Steps for Investors

Investors who significantly allocated their portfolios to equities, gold, or cryptocurrencies in 2025 likely enjoyed considerable gains. As 2026 approaches, evaluating those holdings is crucial to maintaining a balanced investment strategy.

If you began 2025 with a diversified portfolio—typically consisting of 60% in equities and 40% in bonds—those ratios may have shifted by year’s end. For example, a portfolio that was 65% equities and 35% bonds by December suggests a need for rebalancing. Many financial experts currently view the stock market as potentially overvalued, with concerns that major indexes like the S&P 500 might not sustain their growth into 2026.

Planning Your 2026 Investment Strategy

Determining your portfolio composition for the end of 2026 is essential. A critical question to consider is whether you wish to maintain a 60/40 ratio of equities to bonds or if you are inclined to protect the gains you amassed in 2025. Assessing your outlook on the stock and bond markets will inform your decisions.

If your objective was a 60/40 portfolio at the start of 2025 and it has inadvertently shifted to 65/35 by now, selling some equities and reallocating those funds into more conservative investments—such as Certificates of Deposit (CDs), T-bills, or 30-year Treasury bonds—could be prudent. Given the possibility of diminished equity performance in 2026, adopting a more conservative investment strategy may help safeguard your 2025 gains.

Understanding Required Minimum Distributions

When planning your asset allocation for 2026, consider any required minimum distributions (RMDs) you may need to take. If you were aged 73 or older in 2025, you are required to withdraw RMDs from any traditional IRA, SEP IRA, or SIMPLE IRA. This requirement also extends to employer-sponsored retirement plans like 401(k) accounts unless you have not yet retired.

If you turned 73 in 2025, you could delay your first RMD until April 1, 2026. However, this will necessitate taking two RMDs in that calendar year. If you experienced significant gains in your traditional retirement accounts last year, it is advisable to consult with your retirement account custodian or financial planner to determine the exact amount of RMDs required for 2026.

For those intending to make charitable contributions, using qualified charitable distributions (QCDs) before taking any RMDs can help minimize federal tax obligations.

Navigating Inheritance Planning

If you inherited traditional retirement accounts after 2020 from someone other than a deceased spouse, understanding the implications of that inheritance on RMDs is essential. The SECURE Act introduced the ten-year rule for inherited accounts. Under this rule, beneficiaries must take RMDs annually if the deceased account holder had already begun withdrawals, regardless of the beneficiary’s age. If the deceased was not taking RMDs, beneficiaries must liquidate the remaining assets within ten years, with withdrawals from non-Roth accounts being taxable.

Given these complexities, reviewing your RMD strategy with a financial adviser is highly recommended if you inherited non-Roth retirement accounts.

For any questions or concerns, financial expert Elliot Raphaelson invites you to reach out at [email protected]. As 2026 approaches, taking proactive steps to reassess your portfolio can help safeguard your investments and ensure you are well-prepared for the year ahead.