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By Christine Benz | 03-23-2013 11:00 AM

Give Your Portfolio a Checkup

Morningstar's Christine Benz shows you how to uncover portfolio strengths and weaknesses, determine the impact of market movements on your asset mix, and more.

Portfolio Makeover Week
Are you looking for tips on improving your portfolio? As part of's Portfolio Makeover Week in May, director of personal finance Christine Benz will be making over five real-life portfolios to show how investors of all stripes may streamline and upgrade their holdings.

To be considered for a makeover, submit a request to Include a general description of your situation, including portfolio size, as well as your goals for the makeover.

If you are selected, your before and after portfolios will be featured in a article, but you will not be identified by your real name. (Click here to see last year's portfolio makeovers.)

The following is a replay from the 2013 Morningstar Individual Investor Conference.

Christine Benz: Welcome our next session of today’s conference. We will be talking about how to give your portfolio a checkup.

As in all of today’s sessions, we welcome your questions; if you would like to submit one, please click the Ask a Question link to the right of your viewer. If you would like to get a look at my slides and download my slides, we will be providing a link to download them, and that will appear in the chat window below your viewer.

Before we get started today, one question I often get about giving portfolio checkups is just how often you should be doing this. I talk to a lot of investors who probably overdo their portfolio checkups. They look at them on a weekly, monthly or even more frequent basis, and my advice is always that less is more when it comes to this sort of checkup. So, I think, semiannually or annually is plenty for most investors. If you are checking up a lot more than that you might be tempted to get in there and make changes, changes that might not be necessary, and in turn you might incur tax and transaction costs and you might be responding to short-term performance. So, I would say you would want to go through this sort of comprehensive checkup that I will discuss today just about once or twice a year, nothing more than that.

In this presentation today, I’ll run you through six key steps that I think investors should be taking as they’re thinking about reviewing their portfolios today. So, the first one would be just a basic wellness check. See how you’re doing relative to your goals, and I will split this checkup into two tracks; one for people who are in accumulation mode and the other for people who are in retirement.

The next step of the process is to review your portfolio's overall exposures, and I will talk about how you can use some Morningstar tools to do just that.

I will also talk about the importance of checking your liquid reserves, money that you need to have on hand to fund near-term living expenses or perhaps emergency expenses. So, I will share some benchmarks for your liquid reserves, how much you want to have in cash currently. I will then get into some quick rules of thumb for reviewing individual holdings, both mutual funds, as well as stocks and I'll share some things that I see as yellow or red flags that should jump out at you as you review individual holdings.

I'll also talk about some potential risk factors that loom for investors today, particularly in the realm of income-producing securities. We've seen a lot of interest in that area, but I think that there are some risks that perhaps some investors are underestimating. We'll talk about how to look at some of those risk factors in your portfolio.

And the last step in this process is doing an audit of the overall costs you're paying to keep your portfolio up and running. So, I'll talk about looking at your overall investment-related expenses in the portfolio, as well as your tax costs, and I'll discuss why I think that's so important.

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