• Basic Membership Access to Journal, Shadow Stock portfolio & monthly updates for stock screens
  • A+ Investor Full access to AAII.com, Journal, and a power data suite for investment ideas
  • AAII Platinum Full access to all of AAII's model portfolios and premium services at a significant discount
  • Dividend Investing Newsletter and model portfolio that focuses on dividend growth
  • AAII Growth Investing Find secular growth stocks poised for outperformance regardless of macroeconomic conditions.
  • Retirement Investing Discover trusted strategies for every stage of retirement. Get actionable insights and resources for smart retirement planning.
  • Sentiment Investing A research-driven newsletter with 10+ signals decoding sentiment across retail and institutional behavior.
  • Stock Superstars Report Get stock ideas inspired by the market's leading professionals
  • VMQ Stocks For the value investor looking to harness academic research in an actively managed portfolio
  • Bits and Bips Newsletter delivering insights on linking traditional finance, macro trends and cryptocurrency opportunities to help investors build stronger, more diversified portfolios.
All premium products come with free basic membership.
Explore All Membership Options
Join Now
AAII How-To Portfolio Strategies

It’s Time for Your Midyear Financial Checkup

Use this convenient midyear checklist to keep your finances on course.

by Sam Levine | July 2026

  • A midyear financial checkup reviews your net worth, cash reserves, goals and household changes
  • Review tax-planning strategies, RMD rules, withholding adjustments and taking losses to offset gains
  • Check your asset allocation, sector exposure and individual holdings for disciplined rebalancing and stock evaluation decisions

It’s a good idea for you to update your household’s financial plan once per year and do an informal checkup in the middle of the year. A checkup doesn’t need to be as time-consuming and detailed as a formal review. Simply ask yourself the questions presented in this article, decide whether changes are warranted enough to act and make changes as needed. Easy peasy.

Here’s a convenient checklist to tick off to keep your finances on course.

Assess Your Current Finances

How has your financial position evolved over the past six months? Have there been any big changes to your income or financial net worth? If so, you might want to formally update your plan.

Once you have an idea of your net worth and cash flow, make sure you have enough resources to take care of an urgent expense or to capitalize on a sudden opportunity. Financial planners often recommend having a rainy-day fund of cash or cash equivalents equal to six months’ worth or one year’s worth of household expenses. If you don’t have enough cash on hand—and we understand that many do not—are your investments stable enough to cover surprise expenses? If not, make a note of this for your annual review or make changes now.

Consider Any Major Changes in Your Household or Your Financial Goals

Have there been any recent changes in your family’s situation or dynamic? That could lead you to change beneficiary designations, your will and any trust documents. Is a breadwinner in your household getting close to retirement? If so, it’s a good idea to evaluate how much risk is in your portfolio. Though it’s probably wise to wait until an annual review to change your overall asset allocation, you might begin to buy higher-quality stocks, funds or bonds.

How have your family’s financial goals changed in the past six months? Maybe you’re enjoying your job enough to postpone retirement for a few more years. Perhaps your long-held daydream of a vacation home has lost some of its luster. These questions can either lead to formally updating your plan or making a note to investigate these issues in your annual review.

Is one of your children or grandchildren thinking about pursuing a graduate degree? If so, would you like to help financially support them? If you donate to charity, do you still want to support the charities you’re currently giving to? Every household has its own list of priorities. What else might have changed that could affect your financial plan?

If you’ve neglected to write an overall financial plan that sets down your goals and risks, our PRISM Wealth-Building Process can get you started. See the lastest PRISM article in this issue.

Minimize Your Tax Exposure

This is a good time to reassess your tax liabilities and deductions. Do you have paper losses that, if taken, can offset capital gains? Many investors are hesitant to take losses, but locking in a surefire tax offset and replacing it with a similar security with the same risk/reward exposure is often a good idea. Capital losses can offset taxable income (to a degree) and be carried forward to be applied against future years’ gains.

If you are required to take mandatory withdrawals from a retirement account or an inherited individual retirement account (IRA), make sure that you have withdrawn or have a plan to withdraw the appropriate amount; the Internal Revenue Service’s (IRS) penalties for failing to take required minimum distributions (RMDs) can be severe, up to 25%. If you are participating in a work-sponsored retirement plan and aren’t a 5% or more owner of the sponsoring business, you may defer withdrawing from the account until you separate from that employer.

Has your income gone up? If so, is your employer withholding enough from your salary to satisfy your expected tax liability? If not, ask your employer to adjust your withholding amount. The same applies to estimated tax payments, if you are making those. Overpaying might be a conservative approach, but that’s money that could be earning interest or capital gains over the year.

Once you have refreshed your household’s financial picture and goals, it’s time for your midyear portfolio update. It’s best to do this from the top down: Start with asset classes, move down to sector allocations and, from there, assess individual securities.

Check Asset Allocation Against Your Target

The market has been volatile over the past six months. But, then again, the markets have always been volatile to one degree or another. You should already have what planners call an investment policy target allocation that reflects your expectations for assets’ returns over the long term as well as your ability and tolerance for market volatility.

Market moves or any transactions you’ve made may have caused your current allocation to drift away from your target allocation, leaving your portfolio with either more risk than you intended or less potential upside than needed.

Rebalancing your portfolio not only addresses that but also naturally avoids overexposure to a price bubble. For example, if your policy allocation is 60% stocks, 35% bonds and 5% alternative assets but appreciation from a few good picks led your portfolio to be composed of 70% stocks, 20% bonds and 10% alternatives, rebalancing will reduce the impact of the outperforming asset class reversing itself.

A+ Investor and AAII Platinum subscribers can use the Diversification Analyzer at My Portfolio to determine if their portfolio allocations have strayed too far off track.

Compare Your Sector Exposure to Benchmarks

Once you’ve checked your allocation between asset classes, compare your sector exposure to those in your preferred benchmark(s). If the information technology sector makes up 35% of the value of the S&P 500 index and your portfolio has a 75% exposure to technology, it’s unrealistic to expect market-like returns from your portfolio. You might be comfortable with that, or you might not. But it is important to know how aligned your portfolio is with your personal investment policies.

A+ Investor and AAII Platinum subscribers can also use My Portfolio’s Diversification Analyzer to see their sector breakdowns.

Take a Good, Hard Look at Your Individual Holdings

By now, you have identified any gaps between your target allocation and your current portfolio. Now, it’s time to look for sell candidates that can raise money to fill those gaps.

AAII strategies generally prefer to give a loose leash to outperforming stocks, unless they grow to dominate the portfolio’s performance. A common rule used by AAII model portfolios (such as Growth Investing and VMQ Stocks) is to consider trimming positions that are more than 2.5 times the average position size. For a 20-stock portfolio, the maximum size of the position should be 12.5% or less. AAII’s My Portfolio tool makes checking this easy for all members by showing the percentage weight of each investment in your portfolio (Figure 1).

Figure 1. Portfolio Weights at My Portfolio

You can also keep tabs on the gain/loss since purchase for your holdings using My Portfolio. Underperformers should get a closer look. If your taxes benefit enough from booking a capital loss and there’s no compelling reason to hold onto the underperformer, sell it. Stocks that are flat or underperforming your target return or a benchmark should be checked against the reasons you bought them. If a stock no longer fits the parameters that led you to hit the buy button and it’s been a disappointment, it’s likely a strong sell candidate.

We humans are naturally inclined to avoid change, so you may find yourself justifying holding onto a stock even if the company has little in common today with the company you originally bought. Adopting and following a rules-based approach helps avoid inertia.

Some stocks will underperform even if they meet all the guidelines. Though individual stocks’ performance is expected to diverge from the overall market’s, waiting years for a stock to catch up to expectations isn’t necessary when a world of fresh opportunities awaits.

Replace Sold Holdings and Enjoy Your Summer

Use that newly freed-up cash from selling to rebalance your portfolio toward your target allocation. If you’re looking for ideas, AAII has an abundance of tools at your disposal, including 55 stock screens, top exchange-traded fund (ETF) and mutual fund lists, and model portfolios. Visit the Investor Hub and the fund guides to dive in.

Discussion

JOHN L from NJ posted about 1 month ago:

What a great way to destroy long term investment returns. Check your investments frequently and make changes to your long term strategy. Doing nothing is almost always the best investment move!


BARRY J from TX posted about 1 month ago:

Concur with John L. #1 This article appears to recommend using a behavioral EMOTIONAL RESPONSE to fix a non-existent "problem" ... all for the sake of promoting use of AAII services. Who is being served by this? 2026 markets are outliers. #2 Rebalancing -- moving weightings (amounts) and balance (allocations) around in a portfolio -- in "the middle of the stream" (or in mid-flight) usually capsizes the ship, crashes the aircraft, or wrecks the car. #3 "Stay the course" means continuing to fly straight and level on the same course you charted as your "best" course ... and stop looking at the scenery. #4 Of course, all bets are off if you are flying into RISING terrain or running out of FUEL.


BARRY J from TX posted about 1 month ago:

Charles, #1, despite my kvetching, your article "zooms out" from financials and sets out a systematic, step-wise process to recognize and address changes to the family's existential situation. #2 The sentence here that “Every household has its own list of priorities” evokes the maxim in the first sentence of Tolstoy’s “Anna Karenina," "Happy families are all alike; every UNHAPPY family is unhappy in its own way." #3 This quote is widely recognized and has been adapted as "the Anna Karenina Principle.” The principle means that for an endeavor to succeed, ALL NECESSARY CONDITIONS must be met. While there are countless unique ways for it to fail, focusing on weaknesses and threats to "happiness" (and stability) is an appropriate response. #4 In this view, your advice to look beyond finances and survey the family situation is good advice. Regards.


SAM L from USA posted about 1 month ago:

All, thank you for your comments. @John, there are many that will agree with you, including members of my family. Some of them have held on to the same stocks for 20 or even more years. But I believe investors' needs should dictate their investing policies, and those policies should drive their allocations and investment decisions. If an investor starts with the intention of holding a diversified portfolio and one sector dominates for a decade or so, wouldn't the portfolio have far more volatility than originally intended? Would that lead to excessive potential volatility when the owner is closer to the withdrawal phase of their investing career? Sam Levine, CFA, CMT AAII Staff


JOHN L from NJ posted about 1 month ago:

Sam - I am a big proponent of minimizing portfolio changes because there is research showing a strong relationship between portfolio turnover and long term returns (less turnover better performance). An investment plan should only change when there is a material change in personal circumstances such as the death of a spouse, cancer diagnosis that shortens expected life span, birth of a child, early forced retirement, and etc. This doesn't happen every six months.


SAM L from USA posted about 1 month ago:

@John, yes, I've heard that too. Here are a few things to consider: first, commissions and bid-ask spreads have declined significantly over the years. Second, and I find this funny: have you heard about that study at Fidelity that showed that its best-performing accounts were those of dead clients? It turns out no one has been able to find that study. It might be a myth. All that said, yes, I prefer holding for the long term, but not if the reason for originally buying a stock is no longer valid. We also haven't spoken about position sizing. I'm a firm advocate of trimming oversized positions, even if its into existing holdings. But one of the joys of the market is people can have entirely different investing approaches and still get satisfactory results.


ROBERT A from NC posted about 1 month ago:

I agree with John L's and Barry's first comments above. Sam L is obviously steeped in conventional wisdom, as manifested by the post-name letters. I'm so glad that over 45 years of buy-and-hold investing in 100% equities, I never listened to people like Sam. My children and grandchildren will also be happy about that.


JOHN L from NJ posted about 1 month ago:

Sam L - Not laughing about your fictional Fidelity study. The foundational research on turnover and returns was done by Barber and Odean. See their 2000 Study "Trading is Hazardous to Your Wealth" You might also want to look at the SPIVA scorecards showing the long term under performance of active fund managers. It never ceases to amaze me how many investors think they or their financial advisor can beat the market index when all the evidence shows that after costs very few actually beat the market index.


CRAIG B from WI posted about 1 month ago:

Thanks for the interesting and lively discussions. As per usual though, everyone is correct and everyone is wrong...we just don't know when each occurs and neither do the financial moguls who dominate the media. Not paying attention to TV or email recommendations goes a long way to having better than expected investment success. I cringe, and usually run from, anyone proclaiming to be an "expert", especially in economics, religion and politics. Oh, and sports! :)


BARRY J from TX posted about 1 month ago:

A July 8, 2026, article by frequent AAII contributor Larry Swedroe entitled, "Risk Investors Compensated to Bear Isn’t Volatility" presents new research that finds that extreme downside [market] shocks drive the [upside] equity risk premium. Those who cannot tolerate the [downside] discomfort are the ones who pay for it, and the article concludes, "The equity premium is compensation for bearing [downside] risk that is concentrated in bad times [i.e., large downside ("fat left tail" negative markets]. Those who stay invested through periods of elevated left-tail consumption risk [down markets] are the ones who earn the [upside] premium [when markets recover]. Those who cannot tolerate that discomfort—and exit precisely when skewness is most negative—are the ones who pay for it." NOTE: James Cloonan, Dr. Bob, and other AAIIers could have said this in in 2 words, "Stay invested."


BARRY J from TX posted about 1 month ago:

I checked Swendoe's conclusions against the Microsoft Chatbot, and it said, "You are entirely right: volatility isn't the risk investors are actually paid to bear. Markets compensate you for permanent loss of capital, tail risk (severe, unexpected crashes), and liquidity risk, whereas mere volatility is just the price you pay for long-term growth. Financial theory—such as the Capital Asset Pricing Model—shows that investors are only rewarded for taking on unavoidable, systematic risks. Volatility is often temporary; permanent impairment occurs when a fundamental asset breaks, a company goes bankrupt, or you are forced to sell at the bottom of a cycle. Furthermore, because many investors act emotionally and overpay for speculative, high-volatility stocks hoping for a "lottery" payoff, less volatile stocks often provide better risk-adjusted returns over time." Once again, James Cloonan, Dr. Bob and other AAIIers could have said this in 2 words, "Stay invested."


SAM L from USA posted about 1 month ago:

@John L, I'm glad you brought up SPIVA, because it's a headline number that has little bearing in reality. If you want to duplicate the SPIVA odds of performance or underperformance, then throw a dart at a list of active funds that are benchmarked to the S&P 500. Then your odds of outperforming the index will be similar to what SPIVA implies. But what I have yet to see from S&P Indices is the dollar-weighted return. Investors don't select funds randomly, and lagging funds won't attract investing dollars. It's reasonable to presume the worst funds will get less assets than better funds. SPIVA is a great marketing tool for passive investing, and color me unsurprised that an index publisher features SPIVA so prominently. And, John, you also mention a study that was conducted a quarter of a century ago when bid-ask spreads were in eighths, mutual fund loads were at 5.75% and commissions for a round lot of stock could be $100 (I was there). Costs have significantly dropped for investors. Note, please, that I want everyone to succeed and my 30 years of professional experience has taught me there are many different paths to investing success. One of the reasons I was happy to join this organization is that there's room for different philosophies. Best regards! --Sam


JOHN L from NJ posted about 1 month ago:

Sam L. I'm glad you brought up dollar weighted returns. An area where active funds really suck. Like Kathy Woods Ark Fund or Bill Miller at Legg Mason. Bill beat the S&P 500 for many years and still managed to vaporize billions for his investors. Because as we both know the bulk of the investors joined his fund after the early years when he beat the S&P 500. And then he seriously under performed. Also trading is still hazardous to your wealth. Trading costs have fallen but it doesn't make any difference. More trading leads to more opportunities to screw up. The percentage of folks who day trade and make money is really small. Even the famous trader Jessie Livermore said "The big money is made by sitting, not trading". He should have taken his own advice instead of committing suicide after losing his fortune over a bunch of bad trades. Here is the simple truth; you and many others want to beat the market. But the reality is that beating the market is hard. If you were actually good at trading and could beat the market you would be running a hedge fund instead of writing articles for the AAII. Those who can do; those who can't write articles for naive investors.


SAM L from USA posted about 1 month ago:

Hi John L, Thank you for your perspective. I welcome respectful discussion that leads to insight and look forward to engaging with you again on those terms. Regards, --Sam


BARRY J from TX posted about 1 month ago:

Sam, “respectfully,” the “fictional Fidelity study” is probably an erroneous reference to a Morningstar series entitled “Morningstar’s US Active/Passive Barometer Year-End 2025.” The current study can be found at https://www.morningstar.com/content/cs-assets/v3/assets/blt9415ea4cc4157833/blt5aba5776f3a651af/6994e7ad0d21c50008e81800/US-Active-Passive-Barometer-H12026.pdf. The Barber and Odean study is a seminal work, but is 25 years old and uses backward-looking data older than Morningstar. The MS report data is current as of EOY 2025. They both say active fund managers have very low odds of beating market beta. Sharpe first pointed this fact out in 1964.


SAM L from USA posted about 1 month ago:

@Barry, thank you. I'll check out that Morningstar reference shortly. The alleged Fidelity study story has been floating around long before 2025 though. Morningstar is an excellent data source, but note how it focuses on avoiding bad money managers (a good thing but also supporting its business model). Let's key in on the "success rate" metric: it ignores magnitude of the beat or miss. Investors don't. Likewise, the "excess return" doesn't seem to factor in risk. Some fund managers have risk constraints that their clients find valuable, but penalizes their performance. Let's be clear though; I am not arguing and never have here that active managers and investors have a tough time beating the markets. Fund manager performance isn't representative of how well individual investors can do, because their opportunity sets are different. A fund manager with billions to invest can't jump in and out of the market without moving the price. Individuals aren't as constrained by liquidity or other constraints. And, because you were civil, I'll also respond to John L.'s ad hominem attack. He aggressively assumes that my primary motivation in life is to beat the market. Nope, my primary investment goal is for my portfolio to perform the way I want it, and even so, curiosity and a love for education drives me more than a few basis points, though those are always appreciated.


ROBERT A from NC posted about 1 month ago:

Sam, "[your] primary investment goal is for [your] portfolio to perform the way [you] want it." What, exactly, does that mean? You indicate you aren't interested in beating the market, so what is your objective? What should be the focus of those you are "educating"?


SAM L from USA posted about 1 month ago:

@Robert, I consider my risk tolerance and tax considerations when evaluating my portfolio and encourage others to do the same.


ROBERT A from NC posted 21 days ago:

Sam, how do you define "risk"? Do you really mean "volatility"? To a long-term investor, the two have NOTHING to do with each other. (I question whether there is any such thing as a short-term investor. I'd call such an animal a "speculator" instead of an investor.) Just my humble opinion.


SAM L from USA posted 18 days ago:

Robert, you have your own definition of risk and that's fine by me. Individual investors should protect themselves against the risks that most concern them. I suggest you ask a search engine about different kinds of investment risks. I wouldn't call all short-term investing speculation. Consider arbitrage and and long-short paired investing, for example. Or, heck, a three-month t-bill (though I know you were thinking of equities in this case).


You need to log in as a registered AAII user before commenting.
Create an account

Log In

Get your free copy of our special report analyzing the tech stocks most likely to outperform the market.
Download the FREE Report Here: