Polish Your Portfolio

As much as you might like to sell in May and go away, what you need to do right now is review your portfolio top to bottom.

The sell-in-May adage harks back to an era of Wall Street money managers who, we're told, wanted to enjoy some peace and quiet in the Hamptons without worrying about missing a summer rally. You too might rather relax at the beach rather than evaluate your monthly fund statements. But every investor should periodically review everything from expenses to performance -- and if something doesn't match, pack the manager's bags.

Provided your mutual fund manager keeps his nose clean and his expense ratio within reason, perhaps the most significant issue is making sure the manager stays with the philosophy you thought you were buying into when you purchased shares of the fund.

In other words, make sure you get the management you are paying for by following these simple practices:

• Read the prospectus. The prospectus serves as the fund's promise to take care of your money according to your requirements. Managers that fail to adhere to their stated philosophy endanger investors' diversification efforts.
  
• Review holdings twice a year. If you find a growth stock in your value fund, you need to find out why and take action if necessary. It's similar to finding a fly in your soup in a restaurant. What do you do? You send it back to the kitchen!
  
• Set a standard for service. If you find yourself wasting too much time on hold waiting for an answer to a simple question about your fund, then you might want to shop around for a replacement.
  
• Get a second opinion. With all of the financial resources currently available online at Morningstar.com, Lipper.com and elsewhere, investors can easily and quickly compare notes to see if they are in a fund that's right for them.

That's the short version of reviewing your funds. But don't forget to consider these other issues as well.

Whose Side Are They On?

The mutual fund scandal was still on the minds of attendees at the annual Investment Company Institute meeting held earlier this month, but it was a far less heated topic. Last year, the fund industry's main trade group was still in crisis control mode, answering calls from investors still smarting from the revelations that unsavory characters were late trading and market-timing their funds with impunity.

Fast forward to this year, when perhaps the best attended seminar was on how to market funds to baby boomers who are living longer.

Similarly, the pace of withdrawals from scandal-tainted fund companies like Alliance, Putnam and Janus has tailed off since the crisis came to a head. On the whole, these companies have retained the majority of their business by promising to clean up their act and offering retribution to deceived investors.