Posted By: Janine Delacroix

By Linda SternSat Nov 11, 10:57 AM ET

WASHINGTON (Reuters) - Most investors choose their stocks
and mutual funds carefully -- and then forget about them.
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They add to the mix without subtracting. Years go by, and
they may look at their statements and say: "When did I buy
that?" or "I still own that?"

Folks, it's time to prune. The end of the year is the
perfect time to organize what you own and get rid of what you
no longer want. Here's how:

-- Put it on your calendar. Start by setting aside a block
of time, say a couple of hours, to collect the information you
need and set guidelines for analyzing your investments. You can
review everything you own in one marathon session, or devote 30
minutes every day to review one or two investments.

-- Start by examining your investment philosophy and goals.
Do you believe you can choose stocks and actively managed funds
that beat the indexes? Or do you believe that less managing
means lower fees and eventually a better performance? Are you
saving for the long term or stashing away money you'll need
within five years for college or a down payment?

Once you answer these questions, you'll have a clearer idea
of how individual securities fit - or don't fit - your plans.

-- Do a tax analysis, or ask your broker to do one for you.
Sell securities that will produce a loss that you can use on
your tax return. This may mean selling your entire holding of a
stock, or selling only certain identified shares of a mutual
fund.

-- Look for duplication. Do you have five stock funds that
all seem to be dominated by shares of Pfizer, General Electric,
Home Depot and Citigroup? Unless you can find a good reason why
you own so many different funds that act similarly, sell the
four that are less worthy (perhaps they have weaker
performances or higher fees) and consolidate that money into
the best fund.

What about multiple stocks that achieve the same portfolio
goal? Maybe you like bank stocks, and so you own several
different ones. That's OK. On the other hand, if you find
yourself buying various versions of what's essentially the same
stock over and over again, pick the best and prune the rest.

-- Would you buy it now? That's the toughest question
investors have to ask themselves because they get emotionally
involved in the stocks that they own. But evaluate your
holdings by the same criteria that caused you to buy them.

Are they still attractively priced? Is the company's story
still persuasive? Is it a good value, relative to its cash on
hand, its earnings and other companies in its same niche? If
the answer to all of your questions is "no," then maybe the
next thing you say should be "sell."

-- Find a balance. Theoretically, your portfolio is
structured to fit a certain asset allocation. You may have
initially decided, for example, to have 40 percent in large
U.S. stocks, 20 percent in small U.S. stocks, 20 percent in
foreign stocks and 20 percent in bonds.

But every year, that gets skewed when some asset classes do
well and others don't. This year, your foreign funds and your
large-cap stock funds have probably far outstripped your small
companies and your bonds. You may find you want to get rid of
some of the winning shares and invest more in securities where
the price is right.

-- Give away stock. Want to get rid of some shares that
will produce a taxable gain? Here are a couple of alternatives.

Give the stock to your college-student children instead of
tuition. If they're over 18, they can sell it, pay a tax based
on their (presumably lower) income tax rate, and then use the
proceeds to make that tuition payment.

Or give the shares to the charity of your choice instead of
writing a check. You'll get the full deduction, and your
charity won't have to pay taxes on the proceeds.

-- Start looking for your next purchase. Discover any holes
in your portfolio? Now you know what to shop for in the new
year.

(Linda Stern is a freelance writer. Any opinions in the
column

are solely those of Ms. Stern. You can e-mail her at

lindastern(at)aol.com.)

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