Morningstar's Christine Benz helps investors assess allocations, check their progress, target holes and overlap, and upgrade their holdings.
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By Morningstar.com | 05-20-11 | 06:00 AM | Email Article

It may not have been as flashy as the home makeover shows on HGTV, but we hope our Portfolio Makeover Week, featuring the handiwork of Morningstar director of personal finance Christine Benz, did serve up some compelling food for thought for investors whose own portfolios might need some TLC.

Morningstar.com offers coverage of more than 1,700 stocks, 1,700 mutual funds, and 300 ETFs, plus market news, economic analysis, portfolio-planning insights, and investment commentary.

Each day last week, Christine made over a portfolio in need, offering ideas on allocations, asset location, and possible upgrades. Whether you're just getting going, playing catch-up, moving into retirement, or trying to get back in the market, our makeovers had something to pique your interest.

But we're not done yet! After reviewing what we served up last week, be sure to tune in Monday, May 23, for Christine's Premium Member live web seminar, "Do Your Own Portfolio Makeover," at 12 p.m. Central Time. Premium Members can  register now for this exclusive event for free. And if you're not a Premium Member, you can still sign up when you take a free 14-day Premium trial. Even if you can't watch the live event, register anyway, and we'll let you know when the replay is available.

And in case you missed any part of Portfolio Makeover Week, you can catch up on each day's before-and-after below.

Ernesto: Paying a High Price for Peace of Mind
A 63-year-old former engineer, Ernesto is looking forward to a long and happy retirement with a peace of mind that most retirees and pre-retirees would find enviable. Having retired seven years ago and still earning some income through periodic consulting work, he relies on a pension that more than covers his day-to-day living expenses. His children are grown and he owns his home outright. In addition, he has managed to set aside nearly $1 million in investment assets.

His investments' conservative positioning meant minimal losses during the bear market. But with nearly two thirds of his portfolio currently sitting in cash, Ernesto acknowledges that he's very likely playing it too safe. "I am uneasy about the opportunity costs I may be incurring," he wrote. Given that his main goal for his investment portfolio is to leave a legacy for his children rather than to fund near-term living expenses, he recognizes that a larger share of his portfolio should be in investments that have the potential to earn a higher return and outleg inflation.

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Further reading from the Morningstar.com Library for investors with similar objectives and needs:

Manish: Getting Serious About Saving and Investing
Manish feels like he blinked and found himself grown up. A 36-year-old IT executive, he's been married for almost nine years and has a nearly three-year-old son. (His wife is a stay-at-home mom.) Having graduated 15 years ago with a degree from an elite university, he has received a steady series of promotions. At this stage in his life, he is content with his career and happy in his family life.

But he and his wife still have a ways to go to fulfill their financial dreams. First on the list is funding a comfortable lifestyle and retirement. In addition, they'd like to send their son to an Ivy League university, start a charity, and travel extensively. Manish also says that he and his wife may, at some point, need to return to India, where they spent much of their lives, to provide both physical and financial support for their aging parents. Finally, they'd like to be able to purchase a rental property or two, with an eye toward generating passive income. Achieving all of those goals will require considerable resources, which is why Manish wrote to be considered for a portfolio makeover.

Click here to read more.

Further reading from the Morningstar.com Library for investors with similar objectives and needs:

Susan: A Young Retiree's Portfolio "Grows Up"
A retired finance executive, Susan has put together an enviable portfolio. She has chosen her investments with care, and it shows. And even more important, she has been an avid saver and a successful investor, amassing a total of more than $2.8 million as of early May. Given her reasonable living expenses, she's in a good spot, even though she could be funding 30 or more years of retirement.

So what's the problem? Simply put, Susan's current portfolio is out of sync with her life stage. Although she is 55 and recently retired, she currently has a minuscule bond position (2% of her total portfolio) and an only slightly larger cash stake (13% of assets). Susan is cognizant that her asset mix is more appropriate for someone in accumulation mode than a person who is actively tapping her portfolio to meet living expenses.

Click here to read more.

Further reading from the Morningstar.com Library for investors with similar objectives and needs:

Scott: In Search of Income
Scott is a 48-year-old retired military serviceperson who is now working for the U.S. government in a nonmilitary role. He had back-burnered retirement savings until the past several years, and now he has close to $175,000 saved in a Roth IRA, taxable account, and the government's Thrift Savings Program.

He'd like to find a way to retire early (ideally in 10 years) if possible. He has a pension from the military and will receive a smaller pension from his current government job, but needs to find a way for his portfolio to meet his additional in-retirement income needs.

Click here to read more

Further reading from the Morningstar.com Library for investors with similar objectives and needs:

Jack and Marion: Hurtling Toward Retirement, Concerned About Sustainability
For the final profile of the week, we'd like to focus on a predicament that many of you have told us you're in--hurtling toward (or even in) retirement, but concerned that what you've saved won't be enough to last throughout your lifetime.

Using a fictional couple that is a composite of many retirees and pre-retirees we've heard from, we'll address how to stress-test a retirement portfolio to assess its sustainability over many years. The "after" portfolio will also showcase how to adjust a portfolio's asset mix to improve its staying power without taking on excessive risk.

Click here to read more.

Further reading from the Morningstar.com Library for investors with similar objectives and needs:

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