Indeed, in one recent study from Duke University, it was estimated that heavy portfolio-tweakers underperform light portfolio-tweakers by 1.25 percentage points a year. And that’s before taxes. But that doesn’t mean you should leave your portfolio forever on autopilot. Here are four occasions when tweaking is well warranted:

Your portfolio is out of whack
A year ago, you crafted a moderately aggressive portfolio of 60 percent stocks and 40 percent bonds. Now’s the time to check your allocations. If stocks have been good to you and your ratio has risen to 65/35, it’s time to rebalance. That means selling off some stocks and buying bonds. You do this to keep your risk in check. The other reason is to force yourself to continually sell high and buy low. Over the long run, experts say, regular annual rebalancing could juice your returns by more than half a percentage point a year.

You are close to retirement
A major exception to the buy-and-hold guideline is when your life circumstances change dramatically. As you get closer to retirement, the common wisdom is to lower your risk by moving more savings into bonds, less into stocks. The reason is that once you retire, you will be pulling money from the portfolio, rather than putting money in. Should markets crash, an older person has fewer years to recoup the loss. A very general rule of thumb is to invest your age in bonds. “As rough rules go, this isn’t a bad one,” says Brosious.

Your funds have become obsolete
There’s been a revolution in both stock and bond funds over the past decade or so, and management fees have come down considerably. But not all funds have followed suit. According to Morningstar Principia, dozens of index funds simply track the performance of Standard & Poor’s 500 index (500 of America’s largest company stocks), but with vastly different fees. You can spend 0.05 percent a year in management fees for the Vanguard S&P 500 ETF (ticker VOO), for example, or you can spend 10 times as much (0.50 percent a year in fees) for the virtually identical Dreyfus S&P 500 Index fund (PEOPX). There’s rarely a reason not to switch when the price difference is this dramatic.

Your investments are too popular
Investors have a bad habit of making trendy investments. Trouble is, by the time they’re trendy, they’ve very often peaked (think tech stocks in 1999 or real estate in 2006). Buying a stock when it’s hot often means needing to dump it when it’s cold. “Not a profitable strategy,” says Neil Stoloff of SweetSpot Investments in Bloomfield, Michigan. Instead of buying high and selling low, you want to do the opposite, he asserts. Rebalancing (see No. 1) will help you to buy low and sell high as a matter of routine. But if you wish, you can go a step further; be a contrarian and purposely buy what others have been fervently selling, says Stoloff. “That’s what we do—at the beginning of each year, we buy whatever kinds of investments saw the greatest outflow of investor dollars in the previous year.” You needn’t work through the complex number-crunching that Stoloff does to take advantage of a contrarian strategy. Simply look to see what’s hot and what’s cold in the world of investments. What is your brother-in-law selling? What have all the chattering heads on TV and radio been advising you to dump? Move opposite the crowd. For example, if European stocks are unloved by the masses (as they have been of late), you might put five to 10 percent more in European stocks than you otherwise would.

Portfolio tweaks, by definition, are done in moderation. “Tweak, yes,” says Brosious. “Overhaul? … Only with very good cause and … the blessing of your tax advisor.”

New Year, New Investments The Saturday Evening Post

Every four years the air is ripe with speculation about what the presidential election—not to mention the new administration—will mean for the stock market. Will the Dow sink, swim, or soar?

While we can’t know the precise answer to this question, we do know one thing: For the average stockholder, attempting to game the market by radically reallocating your portfolio holdings is a bad idea at any time. But let’s look at some telling statistics about presidential elections. True enough, since the end of World War II, the market has risen in 12 of 16 election years. If that sounds like the market has a good chance of climbing this year, well, you’re right. But that would be no freak event. Standard & Poor’s 500 Index has historically gone up in about 12 of any 16 years. But does it matter which party wins? Studies reported in Bloomberg News prior to the 2012 election revealed that the annualized return of the S&P 500 throughout the past 23 years of Democratic administrations has been 11 percent. Compare that to the 2.7 percent annualized return during the 28 years of Republican administrations. You might want to think twice before rolling the dice on party control, because in 2008, a Democrat won, and the stock market sank in the months following the election; in 2004, a Republican won, and the stock market soared.

What drives these market trends? According to Ned Davis Research and T. Rowe Price, the markets seem to like consistency. In the post-World War II period, when the incumbent party won elections, the market gained an average of 9.2 percent for the election year versus only a meager 2.2 percent when the challenging party won. But what’s happened in the past may have limited bearing on stock market performance over the next couple of months, and beyond.

John C. Bogle, founder of the Vanguard Group and author of The Clash of the Cultures: Investment vs. Speculation, says presidents influence markets. But, he adds, making bets based on presidential cycles is akin to speculating on stocks using tea-leaf readings or whether the NFL or AFL won the last Super Bowl. All of these “strategies” are parlor tricks, says Bogle, “statistical noise.”

What it comes down to is common sense: “The key to profitable investing is buying and holding a well-balanced portfolio,” says Bogle. “Market timing rarely, rarely works.” Using figures from Morningstar, he points out that the average U.S. stock mutual fund—whose manager does considerable buying and selling—underperformed the S&P 500 Index by 1.3 percentage points per year, over the past 15 years. Even more telling, the average investor—who tends to swap out almost a third of his portfolio each year—underperformed the average mutual fund by another 2.2 percent a year.

How can you beat the average investor? Invest your money largely in low-cost, broad-market index funds, says Bogle. Make sure you have a well-rounded portfolio, with stocks—U.S. and foreign, large- and small-company —and bonds. When the going gets rough and holdings tumble, don’t be so quick to sell. Trust that the market will come back, as it always has done.

Yes, who is in the White House, the President, as well as Congress, can affect the market. “We need to encourage our leaders, whichever ones are in power, to think long-term about the strength of the economy, for ultimately, the markets move with the economy,” says Bogle. “Strengthening the economy means tackling the federal deficit, improving infrastructure, creating jobs, and revamping a healthcare system that is costing our nation way too much.”

Such policies take time. “Patience,” says Bogle, “rather than taking wild bets on elections, is how to profit from the markets.”

Election-Year Investing The Saturday Evening Post

In hindsight that was a clever move because not only are bonds less volatile than stocks but their value has risen steadily with the decline in interest rates. But with interest rates at historic lows, those gains won’t—in fact, almost can’t—continue, says Dirk Hofschire, senior vice president of asset allocation research for Fidelity Investments. He predicts that the safest bonds—U.S. Treasuries—are likely to pay just enough in the next decade to keep up with inflation.

Time to get out of bonds? Not so fast, says Hofschire: “The situation argues for realistic expectations not for the abandonment of bonds, and perhaps a portfolio with a good mix of bonds still has much to offer.”

The key word here is “mix.” If Treasuries are paying a paltry two percent, the strategy calls for diversifying. Bonds come in all flavors, just like stocks do.

“Complementing high-quality bonds with a variety of other sectors can help you increase your yield and return potential while protecting against risks such as potentially higher inflation,” says Hofschire.

Treasury bonds are available in both conventional form (with steady coupon payments) and inflation-adjusted (lower, fixed coupon payments but regular adjustments for inflation). Include both in your portfolio. In addition, consider the following:

• High-quality, “investment-grade” corporate bonds. These typically yield about 1 percent a year more than Treasuries.

• Municipal bonds. Historically, bond issues by cities and state governments haven’t paid as much as Treasuries. But right now they are about on a par—and, of course, the difference is that interest on municipal bonds is generally tax-free, making their effective return greater than Treasuries.

• Corporate high-yield bonds. Issued by less-than-financial-powerhouse companies, these bonds are riskier than the others mentioned above but are now paying about 3 percentage points a year more than Treasuries.

• Emerging-market bonds. Issued by countries such as Brazil, Russia, and Turkey, the bonds are now yielding a rate similar to corporate high-yield. These, too, carry risks, but offer good diversification power.

Within each bond sector you can further diversify by choosing a mutual fund or exchange-traded fund that allows you instant ownership of hundreds or more of individual bond issues. The strategy is crucial when investing in options like high-yield (aka “junk”) bonds, where the default of any one bond is more than a remote possibility.

Finally, it may be time for even the most conservative investor to venture cautiously into other areas. Consider lowering your bond exposure by investigating vehicles that pay higher interest rates, says David Lambert, founding partner and wealth advisor with Artisan Wealth Management of Lebanon, New Jersey. “For many of our clients we have lowered the overall allocation of bonds and replaced them with other income-producing holdings such as real-estate investment trusts and dividend-paying stocks.”

But sound money management will always dictate holding some bonds. As Lambert points out, even the largest and most stable stocks tend to be more volatile than bonds.

Taking Stock of Bonds The Saturday Evening Post