If you don't fill your rocket's fins, the wood grain can show through the paint. This is mostly a cosmetic issue. If you like smooth fins, this will work well.

We'll be using wood filler to achieve smooth fins. Primer can also be used to fill the fins, however this method is quicker and easier. At least that's the case for me, personal preference plays a large role here.

For smaller model rockets, I prefer to sand fins before they are attached to the airframe. This makes is easier to sand the fins with less risk of breaking a fin.

For larger rockets, I attach the fins first. This technique works on balsa for low/mid power rockets, and works equally well with plywood for mid/high power rockets.

If you were planning on fiberglassing your fins, then this technique should not be used. That would only weaken the fiberglass to fin bond.

The first step is to water down some wood filler. Elmer's Carpenter's Wood Filler works well for this. Other wood fillers may work too. Scoop some wood filler in a container, add water and stir. You're looking for a consistency that can be painted on, without making the mixture too runny. Just about any brush will do. For larger fins, use a larger brush and mixture container.

Put some blue masking tape on the root edge of the fin. Cover about 1/8" on both sides. This is done to avoid painting the filler onto the root edge. You don't want the filler there as may weaken the glue bond then the fin is attached to the rocket. Use blue masking tape, as it will be the easiest to remove from the fin without damaging it.

Now you can paint on the wood filler. The trick here is to paint both sides at once. Apply some filler to one side, flip the fin over and apply some to the other side. Continue this until the entire fin is covered. If you were to apply filler to a single side first, the wood (especially balsa) can warp. You don't need to paint on a whole lot of filler, just enough to lightly coat the entire fin. Hold on the masking tape while you paint on the filler, to avoid getting your fingers in the filled areas.

A clothespin can be used to hold the fin upright while it dries. While you probably could start sanding the fin after a few hours, I prefer to let it sit overnight. This ensures excess moisture has evaporated, resulting in easier sanding and a smoother sanded surface.

Remove the masking tape from the fins and start sanding them. Personally, I like to start with sandpaper in the 180-220 grit range. This is used only to remove the roughest parts. To really get it smooth, use 320 to 400 grit sandpaper. The idea is to remove as much of the filler as possible, without sanding into the fin.

Please note that the filler is not a replacement for primer. You will want to prime the fins (and the rest of the rocket) prior to painting it.