Despite some bleak headlines—a war with Iran, talk of bubble trouble in the artificial intelligence space, inflation running high—stocks have shaken off those worries. Coming into the second half of 2026, US stocks have notched robust gains, and overseas stocks have performed even better.
When it’s smooth sailing from a returns standpoint, it can be easy to tune out. And certainly, a portfolio management policy of benign neglect beats a too-active one any day. Nonetheless, the fact that stocks have performed so well for so long makes midyear an opportune time to check up on your portfolio. As you go through the process, here are the key items to keep on your dashboard.
Step 1: Conduct a wellness check.
Start with an assessment of the state of your plan. Are you on track to reach your financial goals?
If you’re still accumulating assets for retirement, check up on whether your current portfolio balance, combined with your savings rate, puts you on track to reach whatever goal you’re working toward. Tally your various contributions across all accounts so far in 2026: A decent baseline savings rate is 15%, but higher-income folks will want to aim for 20% or even higher. Not only will high earners need to supply more of their retirement cash flows with their own salaries (Social Security will replace less of their working incomes), but they should also have more room in their budgets to target a higher savings rate. (If you’re a supersaver between the ages of 60 and 63, don’t forget about the special catch-up contributions available to you.) You’ll also need to aim higher if you’re saving for goals other than retirement, such as college funding for children or a home down payment. In addition to assessing your savings rate, look at your portfolio balance: Fidelity Investments has developed helpful benchmarks to gauge nest egg adequacy at various life stages.
If you’re retired, the key gauge of the health of your total plan is your withdrawal rate—your planned portfolio withdrawals for 2026, divided by your total portfolio balance at the beginning of the year. The “right” withdrawal rate will be apparent only in hindsight, and ideally you would vary your withdrawals each year based on how your portfolio has performed and your life expectancy. The 4% guideline is a reasonable starting point for thinking about safe withdrawal rates for retirees. Our recent retirement-spending research explores the interplay between current market conditions and safe withdrawal rates and delves into how flexible withdrawal strategies can lift starting withdrawals to about the 4% mark.
All-in-one retirement calculators can also be useful when assessing the viability of all aspects of your plan. Tools like T. Rowe Price’s Retirement Income Calculator bring all of the key variables together and help you identify areas for improvement.
Step 2: Assess your asset allocation.
Once you’ve evaluated the health of your overall plan, turn your attention to your actual portfolio. Morningstar’s X-Ray view—accessible to Morningstar Investor users who have portfolios saved to the site—provides a look at your total portfolio’s mix of stocks, bonds, and cash. (You can also see a lot of other data through X-Ray, which I’ll get to in a second.) You can then compare your actual allocations with your targets. If you don’t have targets, high-quality target-date series such as those from Vanguard and BlackRock’s LifePath Index Series can serve a similar role for benchmarking asset allocation. (Compare the allocation of the funds that correspond to your own anticipated retirement date with your own asset allocation.) My model portfolios, geared toward retirement savers as well as those who are already retired, can also help with the benchmarking process.
Thanks to the long-running rally in equities, many hands-off investors are apt to find that their portfolios are quite heavy on stocks relative to the above benchmarks. A portfolio that tilts mostly or even entirely toward stocks is fine for younger investors with many years until retirement. At this life stage, you absolutely need the growth potential that comes along with stocks, so it usually makes sense to maintain as high an equity allocation as you can tolerate. Also at this life stage, checking up on the portfolio’s split between US and non-US stocks is an important step. Non-US stocks rallied in 2025 and so far this year, but most US investors’ portfolios are still underweight relative to the composition of the global market capitalization. Global market indexes are roughly 60% US/40% non-US today.
A too-heavy equity portfolio is a far more significant risk factor for investors who are nearing or in drawdown mode: Insufficient cash and high-quality bond assets to serve as ballast could force withdrawals of stocks when they’re in a trough, thereby permanently impairing a portfolio’s sustainability. If your portfolio is notably equity-heavy relative to any reasonable measure and you’re within 10 years of retirement, derisking by shifting more money to bonds and cash is more urgent. You could make the adjustment all in one go or gradually via a dollar-cost-averaging plan. Just be sure to mind the tax consequences of lightening up on stocks as you’re shifting money into safer assets. Focus on tax-sheltered accounts to move the needle on your total portfolio’s asset allocation, or steer new allocations to the safer asset classes that need topping up.
Step 3: Figure out if you have enough liquid reserves.
In addition to checking up on your portfolio’s long-term asset allocations, midyear is a good time to check your liquid reserves. The standard guidance for working people is three to six months’ worth of living expenses in liquid reserves to serve as an emergency buffer, and higher-income workers and contractors/gig economy workers should target an even higher cushion.
For retired people, I recommend holding six months’ to two years’ worth of portfolio withdrawals in cash investments; those liquid reserves can provide a spending cushion even if stocks head south or bonds take a powder, or if both things happen at once, like in 2022. Retirees whose portfolios are equity-heavy can use rebalancing to top up their liquid reserves.
Make sure you’re getting a reasonable cash yield, as some banks and investment providers aren’t sharing the wealth. Online savings accounts and certificates of deposit are usually among the highest-yielding FDIC-insured instruments, but money market mutual funds, which aren’t FDIC-insured, offer you the convenience of having your cash live side by side with your investment assets. Yields on brokerage sweep accounts, which offer convenience for traders who like to keep cash at the ready, are often stingy on the yield front.
Step 4: Review your equity positioning.
Your broad asset-class exposure will be the key determinant of how your portfolio behaves. But your positioning within each asset class also deserves a closer look. While intra-asset-class performance has been shaken up a bit very recently, many portfolios are heavy on US large-cap growth names, especially in the technology sector. Check your portfolio’s Morningstar Style Box exposure in X-Ray to see how your equity holdings are arrayed across the size/style grid. While you’re at it, check up on your sector positioning; X-Ray showcases your own portfolio’s sector exposures alongside those of the S&P 500 for benchmarking.
Step 5: Evaluate your fixed-income exposures.
On the bond side, review your positioning to ensure that your bond portfolio will deliver ballast when you need it. Taking credit risk has paid off over the past decade, but lower-quality bonds also tend to be more vulnerable during weak economic environments when stocks are also struggling. If you’re adjusting your fixed-income portfolio, redeploying money from higher-risk bond segments into lower-risk alternatives will improve your total portfolio’s diversification and risk level, even as it’s likely to lower the yield. To the extent that you make room for lower-quality bonds, think of them as equity alternatives, not bond substitutes.
Step 6: Check up on your individual holdings.
In addition to checking up on allocations and suballocations, take a closer look at individual holdings. Scanning Morningstar Ratings for stocks and Morningstar Medalist Ratings for mutual funds and exchange-traded funds is a quick way to view a holding’s forward-looking prospects in a single data point.
If you’re conducting your own due diligence, be on alert for red flags at the holdings level. For funds, red flags include manager and strategy changes, persistent underperformance relative to cheap index funds, and dramatically heavy stock or sector bets. For stocks, red flags include high valuations and negative economic moat trends.
Also, take note of highly appreciated positions that are taking up a larger share of your portfolio than might be ideal. (More than 5% of your total equity assets is a good benchmark for “too much.”) Company stock is a frequent culprit in this context. Such holdings are easily addressed if they reside in a tax-sheltered wrapper like a 401(k) or an IRA, where selling won’t trigger a tax bill. If you’d like to reduce holdings in a taxable account, run some projections on how selling might affect your tax bill. If you’re not conversant with the ins and outs of capital gains taxes, seek out the advice of a tax or financial advisor.
Step 7: Make changes judiciously.
Whether you act on any of the conclusions you drew from your fact-finding in Steps 1-6 depends on a few factors—the type and severity of the issue, as well as your life stage and situation, and the parameters you’ve laid out in your investment policy statement.
If you’re many years from retirement, tend to be unruffled by market volatility, and your portfolio has 90% in stocks even as many asset-allocation benchmarks suggest 80% or 85% for people at your age, repositioning your long-term portfolio probably isn’t urgent. But if you do decide to make changes, be sure to take tax and transaction costs into account. Focus any selling in your tax-sheltered accounts, where you won’t incur tax costs to do so, and you can usually skirt transaction costs, too.
Making changes can be more pressing if you’re getting close to or in retirement, especially if your portfolio is too aggressively positioned and you don’t have enough in safe assets to tide you through sustained weakness in the stock market. In that case, it’s wise to think about redeploying some of your enlarged equity portfolio into cash and bonds.
Editor’s Note: A version of this article appeared on June 25, 2025.
