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Get back on track
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November 27, 2001: 12:38 p.m. ET
With the market down, now is the best time to get your portfolio in shape.
By Walter Updegrave
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NEW YORK (CNN/Money) - Feeling anxious about your finances? Nobody could blame you. But here's a suggestion. Gather all your records, set aside a few hours and embark on a comprehensive re-evaluation of your portfolio. In fact, there has never been a better time to give yourself a full financial checkup.
Here's why. With stock prices low, you have the chance to purge your portfolio of underperforming stocks and funds without incurring a large tax bill. Then you can use the proceeds to realign your asset mix and set yourself up for the inevitable recovery. After all, the way you position your investments today will have a dramatic impact on your performance in the next phase of the market.
Today's ultra-low interest rates offer another lucrative opportunity. With 30-year fixed-rate mortgages averaging close to 6.5 percent and some home-equity lines of credit at 5.5 percent, homeowners have the chance to slash their monthly payments or raise cash for other uses.
Moreover, a close look at your own finances will deepen your understanding of what's going on in the markets today and may turn up some pleasant surprises, especially if you own bonds and value-oriented funds that have cushioned the decline of the past 18 months. In any case, mapping out a plan is the best way to regain a sense of control over your future.
In this special report, here's a six-step guide to getting back on track. It starts with a plan for identifying your financial goals and seeing where you stand. From there, we suggest the immediate moves to shore up your finances -- building a cash reserve, reducing debt and so on. Then we address ways to analyze your investment portfolio and redeploy your assets.
Get back on track
Step one: Calculate your net worth.
Step two: Review your fiscal health.
Step three: Set your financial goals.
Step four: Build an asset allocation plan.
Step five: Study your portfolio losers.
Step six: Rebalance your portfolio.
Of course, as you go through this exercise, you'll want to have as good a feel as possible for the stock market and, assuming your home is one of your largest assets, the housing market. To get up to speed, check out Michael Sivy's analysis of the bear market, and CNN/Money's Your Home section.
Before you dive into this program, keep in mind that the amount of time it will take will depend on the level of analysis you choose to do. You may find that checking your overall stock and bond asset mix or calculating your debt load is all you need at this juncture.
Or you may decide to spend hours calculating gains and losses for every stock and fund you own and researching the current prospects for each. Either way, the time you put in now can pay off for years to come.
This article originally appeared in the December issue of MONEY magazine. 
* Disclaimer
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