Tempted to tinker? Make investment changes carefully

When your portfolio starts to fluctuate, it's easy to think you should reallocate your funds. Here's why you shouldn't. And when you should.

By Katherine Vogt, AMNews staff. Feb. 21, 2005.

Resisting the urge to react to changing stock market conditions can feel a little bit like trying to keep from scratching an itchy rash. Most investors know that the impulse could make their situation worse in the long run, but they have a hard time stopping themselves anyway.

After all, when the market is going up and word is spreading about stocks that have quadrupled in value, people want to make sure they get a piece of the action even though logic would dictate that it might be better to buy when prices are low. The same is true conversely, when the market tanks and people sell stocks in a panic despite their long-term investment strategies and goals.

"Everyone says they're a long-term investor who buys and holds, but then they get emotionally involved, so they try to time the market. At the peak is when most people get in, which is the worst time to get in, but when most people get out is when they should stay in," said Bill Altman, a financial representative with Wellesley Financial Group & Insurance Agency in Wellesley Hills, Mass.

For Altman and other financial experts, there are times to tinker with your portfolio, and times not to.

The most important time to reallocate your investments comes with a significant life change.

"Any personal changes like birth, death, marriage, divorce, retiring sooner, retiring later, inheriting money -- all of these factors will potentially change your portfolio," said Michael E. Goodman, president of Wealthstream Advisors in New York. Advisers say that each life change creates the need to adjust your portfolio to reflect a change in investing goals.