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By Jason Stipp and Christine Benz | 08-28-2013 03:00 PM

In Case of Market Jitters, Click Here

Don't let recent market rockiness throw you off your game.

Jason Stipp: I'm Jason Stipp for Morningstar.

It's shaping up to be a bit of a cruel summer for stocks, as we've seen some volatility and some poor performance over the last four weeks. But if you are itching to take some action, Morningstar's Christine Benz, our director of personal finance, has a few tips for you first. She is joining us today.

Thanks for being here, Christine.

Christine Benz: Jason, great to be here.

Stipp: I think the first thing that we would tell investors is, yes, stocks have had some stumbles--bonds have had some stumbles in the summer as well--but you have to put things in perspective, first of all.

Benz: It's been a great year. Even though the summer has been rough, we've had domestic equities returning about 17% if you own some sort of total stock market index fund. So, even with the recent losses, investors have done all right so far this year if they have held stocks. So, I think that's one of the most important pieces of context for all of this.

Stipp: First half performance of 15%-17% is very good, but also at the same time, you might be worrying stocks are getting overheated. But they really don't look that way on a fundamental basis, at least to our analysts?

Benz: They don't. We have our price to fair value graph on the markets cover page of Morningstar.com. When you look at that today, you see stocks trading at about 1.0, right in line with their fair value. This is our total coverage universe. So, that's not a screaming buy, but nor is it reason to be terribly concerned that we're way ahead of ourselves, even though stocks are way up so far this year. So, I think that's an important piece of context.

Also, when you drill into that fair value graph and you look at the sector valuations, what you see is that there are actually potentially some pockets of opportunity. So, our analysts think that some of the cyclical stocks, which haven't performed as well year-to-date--basic materials stocks, energy stocks--actually look pretty inexpensive at this point.

Stipp: There potentially could be some opportunities out there [still].

If I am itching to do something in my portfolio, you wouldn't recommend tactically moving around and trying to get out of the way, but there are some things you can do when you crack open your [portfolio] and take a look at the underlying [holdings], just to make sure that you are where you think you are.

Benz: The baseline check you want to do is, look at your total asset class exposure, use our X-Ray tool to do that, and see how that compares to your targets. And if you don't have targets, it's time to give some thought to what your targets should be.

Once you're through that process, you can take a look at your intra-asset class exposure. It's an interesting year so far in 2013 in that we have some seen some divergences in performance across style and size factors. We've generally seen small and mid-caps outperform large-cap stocks by a good bit so far this year. So, if you haven't done anything there, you may need to move some things around and potentially move some money up into the larger-cap names, which haven't performed as well.

And you can also look at your geographic exposure, because we've generally seen U.S. stocks outperform foreign stocks so far this year. So, check your allocations there. It may turn out that you need to add to your foreign exposure.

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