Re-examine Your Investment Plans

The best-laid investment plans can quickly go awry if you don't periodically re-examine them. When stocks grow or plummet in value rapidly, they throw the delicate ratio of stocks to bonds to cash that you're trying to maintain into disarray. Take time before the end of the year to review your portfolio to keep your investment strategy on target.

Have a plan in the first place. You should have a broadly diversified blend of stocks, bonds and cash equivalents that makes you and your financial adviser feel comfortable. Stocks or mutual funds should be balanced, as well, with certain percentages devoted to growth stocks, value stocks, large companies, small companies, etc.

Paul Mladjenovic, investment consultant and author of The Unofficial Guide to Picking Stocks (IDG Books Worldwide), currently recommends a conservative mix in this unsettled market. He suggests 25 percent in safe cash equivalents, 25 -- 50 percent in high-grade bonds, and the remainder in value-oriented stocks and mutual funds.

"Don't forget, you should have three to four months of gross living expenses kept to the side, away from your investments," he says. "This means you won't have to pillage your investments in an emergency situation."

Has your life situation changed this year? A divorce, graduation of a kid from college or early retirement may require revisions in your investment goals.

Look at your investment mix. If it's "five or 10 percent off, that's not a big deal," Mladjenovic says. "Take a close look at anything larger than that."

Run-ups in one sector or cashing out of losers may have thrown your portfolio out of whack or left you with too much cash. Sell or buy what you need to restore your optimum mix. Weigh the risk from many different angles, assessing the company, the industry and the market.

Re-evaluate any mutual funds you own. Compare them against an industry benchmark -- say, your small-cap fund vs. the Russell 3000. If yours aren't doing as well as you'd like, consider selling.

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Develop your long-range financial plan.

Use the asset allocation tool.