Second-Half Checkup: A Five-Step Program

Finally, review your portfolio's overall international exposure. Even though nothing has really changed since the beginning of the year -- oil prices still are up and terrorism obviously is not going away -- you need to keep your eye on the world. "It's a small planet so pay attention to the deterioration of international trade policy and currency valuation," suggests David Diesslin, CFP and CEO of Diesslin & Associates in Fort Worth, Texas. These unknowns could have a serious effect on your holdings, so stay tuned.

Make Some Tax Adjustments

Beyond reviewing investments, run a tax projection based on your year-to-date numbers. That basically means dropping your info into TurboTax and attempting to generate a mock-2005 tax return. That will give you a feel for your current tax position and how it will affect your tax bill next April.

If your tax bill is not what you expected, consider adjusting your withholdings or changing your quarterly estimated income tax payments if you're self-employed, says Bill Fleming, director of personal financial services at PricewaterhouseCoopers in Hartford, Conn.

If you think you're going to get a big refund, then maybe you're having too much withheld. And remember, from an economic perspective, you don't want to give Uncle Sam your money.

If you think you're going to owe more than you anticipated, ask your HR department to withhold more from your paycheck (or make a bigger quarterly payment).

You may need to fill out another Form W-4 -- Employee's Withholding Allowance Certificate to have the amount withheld changed. Check out the Web for W-4 calculators for guidance on how much should be withheld. You just drop in a few numbers regarding your tax situation and it will help you determine how much should be withheld.

In addition, scan your portfolio for those few holdings that may have generated some losses; then consider dumping them. Unless you have a strong belief the stock is going to rebound between now and year-end, generating losses will help your tax situation next April. Remember, your losses can offset gains and thereby wipe out your tax bill.