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By Jason Stipp | 07-15-2010 02:17 PM

Don't Just Do Something! Stand There!

From firing your fund manager to tweaking your asset allocation, Morningstar's Christine Benz outlines when standing still may be your best bet.

Jason Stipp: I am Jason Stipp for Morningstar. With the markets bouncing around quite a bit in 2010, investors might feel compelled to take some actions with their portfolios, but Morningstar's Christine Benz, director of financial planning, says sometimes the best action is no action at all. She is here to tell us why. Christine, thanks for joining me.

Christine Benz: Jason, nice to be here.

Stipp: So the markets in 2010 have jumped around a bit. There has been some activity. A lot of concerns have cropped up in 2010. Investors might be looking at their portfolio and thinking they need to do something here, because the market seem to be doing something.

Benz: Right.

Stipp: Is that a good idea?

Benz: Well, not necessarily. In fact, Jason, I think back to a few of my favorite fund managers and one of their favorite sayings is, don't just do something; stand there. And I think for investors that can often be the right choice. So you want to go through the analysis of whether it makes sense to do something, but ultimately standing still may be your best bet.

Stipp: So one of the things that investors will do on their portfolios and may feel compelled to do at certain times is to rebalance, and certainly there are good reasons to rebalance. But how should I have known whether the rebalancing was right for me, given all this volatility?

Benz: Right. It's felt like we've been through a lot and you may think, well, I probably have big changes in my asset allocation. But really when you look at broad asset class performance, what you see is that maybe stock funds are modestly up or modestly down, bonds probably up a little bit.

But this year, even though it's felt very active, has not seen big swings in terms of asset class exposure in most portfolios, is my guess. And you typically want to see big swings before you are making changes or rebalancing because you will incur tax and transaction costs some of the time. So you want to make sure that it's worth your while.

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