Fall season is ripe for reevaluating your investment portfolio

That's because stock prices have dropped dramatically from the beginning of the year, and stocks in certain industries, such as financial services, look like they may languish for some time. That provides an opportunity for investors to harvest tax losses.

Meanwhile, market segments such as energy, gold and oil have soared -- possibly past the point where their underlying value says they should, said David Brady, president of Brady Investment Counsel in Geneva, Ill., near Chicago. That could make it a good time to take profits too.

"This is absolutely the right time to prune your portfolio," Brady said.

How do you do it? The first thing investors need to do is look at each of the stocks they own and ask themselves whether they would buy those shares today, said Michael Kresh, president of M.D. Kresh Financial Services Inc. in Islandia, N.Y.

"I ask people, 'Why do you own this company?' " he said. " 'Because it has gone up' is not a good answer. 'Because my friend recommended it' is not good enough. You ought to own a company because you understand what it does and you like its prospects."

If you haven't done so before, read a copy of the company's financial statements and quarterly reports. Familiarize yourself with what the company does and where it is going, Kresh said. Now evaluate whether today's stock price is fair, cheap or overvalued. (If you need help with the analysis, check out the Times' Investing 101 series online and read the lesson called "Picking Up on Picking Stocks.")

If you like the company's strategies and prospects, and believe its stock price is fair, then leave it alone.

But if it is cheap or overvalued, you should make a second determination about whether to buy more or sell. If it's undervalued, you might want to buy more. If it's overvalued, you might want to sell so you can take a profit.

But if it started high and is now tanking, your decision is more complex: Should you hold on in the hopes the stock will bounce back? Or should you sell, using the loss to help offset capital gains when you file your annual tax return?

You will have to analyze the companies carefully in order to decide whether it's worth holding on to the stock.