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Originally published Saturday, July 6, 2013 at 8:02 PM

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Chuck Jaffe: A midyear fund review is an important tradition

This is a good time of year to examine your portfolio and consider changes, even if you do nothing as a result.

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Your Funds

This year, for the first time since I was old enough to talk, I did not get to wish my dad a happy Father’s Day.

Dad was never one for gifts given on made-up holidays that are focused mostly on kicking up retail sales, but he did love a long phone call, so he looked forward to Father’s Day because it meant a lengthy chat.

Invariably, with me, that included a brief detour into his investments, as Father’s Day became the precursor to his midyear portfolio evaluation.

This part of the conversation typically involved him asking questions because he wanted my “expert opinion,” and me giving answers that were far less about the stock market and his mutual funds and much more about him.

Personally, I think he knew the answers before ever asking the questions, but going through the routine is part of portfolio maintenance, too.

Reminiscing about his questions provides a good framework for a midyear mutual fund review. The Father’s Day fund interrogations always included the following:

Do I have anything that lost too much?

When I first began to help my father with his investments, it was clear that any loss — no matter how temporary — made him nervous, so we worked to reframe the question by defining how much downside he could sit through, and for how long.

Beyond raw performance, examine relative results; there were several times where my father held a fund to diversify his portfolio, saw a stretch where the returns made him uneasy, but never triggered a sell because the fund was still among the best in its peer group.

Not wanting to change his asset allocation, he had no reason to expect to do better by changing horses.

That said, this question reaffirmed the range of performance he was looking for, and the reasons why he allocated assets to fit his needs and desires.

Do I have anything that made too much?

This question sounds odd, but dad ultimately recognized that out-of-character moves change an overall portfolio.

If something spikes upward, you may want to lock in the profits, or rebalance to target allocations.

Suffice it to say, this is a nice problem to have; I’m not sure in all the years my father asked me this question that he ever had a fund that had blown through the roof to where it needed to be cut loose.

Has anything changed with the funds? Is anybody going on or coming off “the watch list?”

Anyone who regularly reviews their portfolio knows not to make sudden moves, so a fund creating concerns from those first two questions moves first to a status of “one to watch.”

Like many people, my father was all about confidence; once he started to lose it in a mutual fund or stock, he began looking for confirmation that he was right, or a sign that he was being too rash.

Funds that went through manager changes or any corporate upheaval were automatically moved to the watch list, if only to make sure that the character of the investment did not change in the months before our next portfolio review.

Is there anything new I should buy?

There are more than 10,000 funds out there, and no one with a diversified portfolio actually needs a new fund.

There are, however, areas of the market that an investor might want to cover, or new investment issues that might be better than what’s in the portfolio.

As my dad got older, he wanted to do more with less, meaning his preference was for fewer funds, but in recent years — as interest rates stayed low and he wanted to diversify his income streams — we looked at new dividend-oriented exchange-traded funds and some closed-end funds to at least consider whether something new would get him re-excited about the overall portfolio.

You don’t want to mess up a good thing — as a general rule, my father would look but not touch — but knowing what is out there and making a conscious decision not to go for the new and improved is better than sitting still with a portfolio wondering if every new issue might look better than what you’ve got.

Should I do anything differently in this market?

A solid portfolio is a mix of good funds, an appropriate asset allocation and a strategy that makes you comfortable no matter what the market is doing. For average investors, market conditions don’t warrant a portfolio overhaul.

With that in mind, however, if the market’s direction or potential is making you lose sleep at night — or has you dreaming of bigger things — it’s OK to adjust to your sleep factor or to indulge your winner’s imagination to a point.

The point, by the way, is where you would be too worried to live another six months without revisiting these questions again; there are too many important things to discuss in the interim to waste too much of your personal or family time on the mutual funds.

Chuck Jaffe is senior columnist for MarketWatch. He can be reached at or at P.O. Box 70, Cohasset, MA 02025-0070.

Copyright, 2013, MarketWatch

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