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Special Report

Morningstar.com's 2012 Portfolio Makeover Week

Morningstar's Christine Benz helps investors assess allocations, check their progress, target holes and overlap, and upgrade their holdings.

It may be more of a suspicion than a conviction, a feeling that's built up, bit by bit, as you've opened your last few investment statements:

Something's not quite right with my portfolio.

Is it earning enough? Is it really on track? Is it too risky? Will it last?

There are many reasons a portfolio could use a makeover. Investments appreciate and depreciate, market forces sway, and--don't forget--you change, too. Your income, time horizon, expenses, and priorities shift over time. All can be good reasons to crack open your portfolio and take a closer look.

During Morningstar.com's 2012 Portfolio Makeover Week, our director of personal finance, Christine Benz, helped a diverse group of investors do just that. She sized up their existing holdings and presented a suggested new lineup for investors in similar situations, while offering ideas on allocation, asset location, and possible upgrades.

Whether you're juggling multiple investment needs, playing catch-up, moving into retirement, or hoping to leave a legacy, our makeovers have something to pique your interest.

In case you missed any of our Portfolio Makeover Week 2012, you can see the before-and-after results below. We think you'll find a lot of ideas for your own investments, and maybe a few answers to those nagging questions.

Note: names and other potentially identifying details have been changed to protect the investors' anonymity. Makeovers are not intended to be individualized investment advice, but rather to illustrate possible portfolio strategies that investors should consider in the full context of their own financial situations. 

Monday, May 14 | Andrew: Making Retirement Work Without a Huge Nest Egg
At age 69 and 57, respectively, Andrew and his wife Olivia have their sights set on retiring soon. Having raised two children and worked hard throughout their careers, they'd now like to travel and do volunteer work in their community. Andrew, who expects to retire before Olivia, also has his sights set on receiving a master's degree in a field he's passionate about. But like many couples at this life stage, Andrew and Olivia are concerned that their portfolio, currently $434,000, won't stretch throughout their retirement years, even though they have a frugal lifestyle and some pension income.

Essential to their portfolio's success is a finely calibrated withdrawal rate as well as a portfolio that balances safety and near-term income needs with long-term growth potential. Andrew wrote us seeking a top-to-bottom review of their portfolio, including its asset allocation and individual investment choices. He'd also like help streamlining a portfolio that has, by his own admission, gotten a bit unwieldy. He wrote, "I may not have the mental resources 5 or 10 years from now to deal with a many-issue, wide-spectrum portfolio (a reluctant bow to realism)."

Click to read this full makeover report

Tuesday, May 15 | Herb: Creating a Portfolio That Will Weather the Storms
With a $1.4 million portfolio, Herb, a 72-year-old retired product manager for an industrial firm, wouldn't seem to have a lot to worry about. But his wife, Connie, is just 66, meaning that their nest egg may need to last 30 years or more. Herb and Connie would also very much like to leave an inheritance for their adult daughter.

Herb wrote seeking input on whether their portfolio could support their desired lifestyle in retirement, including some travel, while also leaving a legacy for their daughter. In addition, Herb would like guidance on whether their portfolio, which currently features 70% of its assets in stocks, is too aggressive. "What I hope to get out of the portfolio makeover," Herb wrote, "is that, by reallocating my holdings, we will have a better chance of weathering any storms that come our way."

Click to read this full makeover report.

Wednesday, May 16 | Chris: New Parent in Search of a Temperature Check
Chris and his wife Stephanie have seen a lot of life changes--and achieved a lot of important goals--in the space of a few short years. Both 32 and married for the past eight years, they have earned master's degrees and recently landed jobs in their respective fields; Chris' job necessitated a move across the country, from the West Coast to the East. They're also proud parents of a baby boy, now two.

With the major groundwork laid for the rest of their lives, Chris thinks it's a good time to do a temperature check on whether their investing plan is on track. He wrote, "While I wish we had started earlier, we have been aggressively saving and investing for the past five years." He and Stephanie would like help assessing their asset allocation, investment choices, and current savings plan, which involves socking money away for their son while also saving for their own retirements.

Click to read this full makeover report.

Thursday, May 17 | Glenn: Bracing for Rising Health-Care Costs
Glenn and his wife Toni are a great example of the peace of mind that can come along with a frugal lifestyle. At 70 and 65, respectively, the couple carefully watches their expenses, which allows them to live on their combined Social Security and pension income. They haven't yet had to touch their $500,000 nest egg, which Glenn has been assiduously building up with income from consulting jobs since he was, as he put it, "forced into retirement" 12 years ago.

That's not to say that Glenn doesn't have concerns, however. While he doesn't worry too much about outliving his assets, he notes that his and Toni's health-care-related costs have been on the rise, and health-insurance premiums now consume 8% of their combined pension and Social Security income. Should those costs drift higher, they'll have to begin tapping their investment portfolio. Glenn also concedes that their portfolio probably includes too much cash, but he likes the security blanket, noting, "I am concerned about the ability to recover from unexpected financial disasters like the 2008 crash." Nor has he been particularly enthused about the performance of his invested assets, writing, "I feel like my invested money needs to work harder."

Finally, Glenn regrets that he hasn't paid sufficient attention to matters of tax efficiency and asset location: With required minimum distributions on the horizon, he'd like to reduce the drag of taxes on his take-home return.

Click to read this full makeover report.

Friday, May 18 | Anne: Investing an Inheritance
Anne and her husband Elliott, 56 and 55, have been socking away money for their own retirements throughout their careers; they've also been saving for college for their three children, now in their late teens and early 20s. When Anne lost her father last year, her family's finances took an unexpected turn: She found herself with a $900,000 inheritance, including individual stocks and mutual funds.

Anne wrote seeking guidance on how to position the inherited assets so they're in sync with the money that she and Elliott have saved in their 401(k)s and IRAs. She'd also like input on how to begin transitioning their equity-heavy portfolio to a more balanced allocation to support withdrawals when the couple begins retiring in 10 or so years.

Click to read this full makeover report.

 Webinar: Make Over Your Portfolio for Retirement
Replay available now.
Morningstar director of personal finance Christine Benz will tell you how to ready your own portfolio for retirement. Christine will discuss how to assess your in-retirement income needs and test the viability of your planned withdrawal rate. She'll also discuss how to segment your portfolio and arrive at an appropriate asset allocation based on your expected income needs. Finally, Christine will share tips for streamlining your in-retirement portfolio so that it requires little in the way of ongoing maintenance. Click here to watch now. Not a Premium Member? Take a free 14-day Premium trial today

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