Just like the tires on a car, the mutual funds in your portfolio must be rebalanced regularly to keep your financial goals aligned. And many advisers will insist that the beginning of the year is the time to rebalance. But is it? "Why run up fees and taxes just because the Earth has gone around the sun?" says Michael Willis, president and fund manager of Colorado Springs, Colo.-based Giant 5 Funds. "We don't think it's relevant to do solar or lunar rebalancing. We like what we call 'relevant asset allocation,' where the trigger is performance-related." Because some of your mutual funds will perform better than others, your investment allotment will likely skew from your original goals over time. Rebalancing is the process of selling off and buying investments in your portfolio in order to get back to your original allocation and to reduce your risk. Basing your investment decisions on the calendar is overly simplistic and can eat away at your returns. A more logical approach is to rebalance when your allocation skews by a certain percent. How far off-balance to allow your investments to skew depends on how much risk you are willing to tolerate. For example, let's say that at the beginning of the year you had several different mutual funds spread out over a range of sectors. Your mutual funds holding gold or large-cap companies -- sectors that did particularly well in 2006 -- would likely have outperformed your other funds. This would mean that those funds represented a higher percentage of your overall portfolio than your original allocation.