It's that time of year again. That wonderful post-Christmas, pre-New Year's week when there is little to do except clean up piles of boxes and wrapping paper, snack on leftover holiday turkey, and catch a few football games. This year, though, you might want to add just one more task to that list -- an annual mutual fund portfolio review. C'mon, you can do it during halftime.

We all know that it's best not to pay attention to the day-to-day fluctuations of our investments. That's part of the appeal of mutual funds in the first place -- handing the everyday managerial reigns over to a professional money manager so we can focus on other things. However, this is sometimes taken too far, and even otherwise hands-on investors leave their mutual funds on autopilot for far too long. It's important to occasionally step back, take a closer look at the big picture, and make any necessary changes -- and what better time than the end of the year?

With that in mind, here are a few questions you might want to ask yourself in the days ahead.

How have I done?
This first step is, surprisingly, often overlooked. It is curious that some investors who track every tick of their stocks and wouldn't dream of missing a quarterly earnings conference call seem to have only a few minutes to spare when it comes to assessing their mutual fund performance. Year-end fund reports are on their way, and most will just get a perfunctory glance at the bottom line.

Part of the problem is that we have virtually no voice or input when it comes to the investment holdings in our mutual funds. The manager calls all the shots, and we are just along for the ride. Therefore, many fund owners choose to sit back, relax, and enjoy the flight, hoping that eventually they will arrive at their destination. However, we do have one very important decision to make -- we have to choose the pilot. Personally, I like to watch from the flight deck, so that at the first sign of trouble I can grab a parachute and bail out.

It's not often that mutual funds unveil all their holdings, so take the opportunity to analyze what the manager is doing with your money. Is he parking too much in cash? Has he made any concentrated sector bets, and if so, did they pan out? Did he nimbly take money out of an area right before it crashed, or double down in another just ahead of a rally? What were some of the portfolio's biggest gainers and losers? (Be aware, some managers have been known to spruce up their portfolios by adding shares of recent winners like SanDisk (NASDAQ:SNDK) at the last minute.)

Once these questions have been answered, you won't only know how your funds performed, you'll know why (what the pros call attribution analysis). Upon closer inspection, you might notice that your small-cap value manager has been loading up on large-growth stocks like Apple Computer (NASDAQ:AAPL) to juice returns -- a potentially problematic tactic known as style drift. You might even belatedly discover that your veteran fund manager retired last summer and passed the managerial duties to an inexperienced rookie.

Don't simply assume your fund managers are always on course; take the time to read their commentary and study their actions.

Do I own a dud?
After step one is complete, you will have a better understanding of how your funds stand on a relative basis. Only then will you know if that 7% return generated by your balanced fund belongs at the top of the leaderboard or the bottom.

It happens to almost all of us. We search high and low, do all the necessary homework, and then finally select what appears to be the best candidate for our investment. But for some reason, once the fund is added to our portfolios, it struggles to keep pace with its peer group. Even the best of funds will lag behind their rivals at one point or another, but when a fund consistently ends up near the bottom of the standings quarter after quarter, eventually some difficult decisions must be made.

It can sometimes be tough to determine whether a fund is truly a dud, or whether the poor showing is the result of an investing methodology that has temporarily fallen out of favor. A dud can occasionally exhibit flashes of brilliance and lure unwary investors, so look for other distinguishing, telltale traits that can't be masked -- high fees, excessive turnover, covert index tracking, and extreme volatility.

Don't be too hasty to dismiss an otherwise solid fund that seems to have lost its way. For example, T. Rowe Price Growth Stock (FUND:PRGFX) delivered a total return of just 22% during the frothy bull market of 1999 -- not even within shouting distance of the 38% gain posted by the average large-cap growth fund. As a result, it trailed behind four-fifths of its peers for the calendar year. However, disappointed investors who chose to jump ship at that time are probably kicking themselves about now.

In the years since, lead manager Bob Smith and his team of seasoned analysts have vaulted into the top decile. With a long-term, valuation-conscious approach, Smith steers clear of overpriced growth stocks and has a preference for blue-chip, cash-generating machines such as American International Group (NYSE:AIG), Citigroup (NYSE:C), Dell (NASDAQ:DELL), and WellPoint (NYSE:WLP). While that strategy might keep returns in check when stocks are soaring, it has helped the fund shine at other times, particularly in down markets. In fact, it has trounced its benchmark by more than 10% annually over the last five years and outpaced the S&P 500 over the past one-, three-, five-, and 10-year periods.

In short, a fund that some may have considered a dud a few years back eventually proved to be of champion caliber. With a rock-bottom expense ratio, stellar tax efficiency, and a battle-tested manager who has delivered market-thumping returns, it was among the first funds recommended in the pages of Motley Fool Champion Funds.

Is it time to rebalance?
After any portfolio pruning, it is time revisit your asset allocations. Over time, our original weightings tend to get skewed by market swings. In an overly simplified example, an investor who begins with a moderate 50/50 mix between stocks and bonds might easily see that ratio become a more aggressive 60/40 in a strong market. To bring these percentages back in line, it might be a good idea to redirect a portion of the money invested in equities back into the fixed income category. At other times, it may be necessary to trim back growth stocks or increase international exposure.

Rebalancing can be tricky in non-qualified, taxable accounts. Any redemption (even a direct exchange from one fund to another) will be considered a sale and thus subject to capital gains taxes. Whenever taxes (and/or transaction costs) become a factor, consider rebalancing by adding new money to underweighted areas rather than taking cash out of overweighted ones.

Of course, there's no unwritten rule that says rebalancing must take place at the end of the year. Champion Funds analyst Shannon Zimmerman outlined some rebalancing tips in his most recent mid-issue update and plans to fine-tune the allocations of his model portfolios on their respective one-year birthdays. Some may even prefer to rebalance once an asset class reaches a designated level of deviation (say, 10% or 15%) rather than choosing an arbitrary date on the calendar. Whichever method you prefer, keep an eye on your allocations to make sure your portfolio remains in sync with your objectives and risk tolerance.

The final step
After taking a closer look at the year behind, it's time to plan for the year ahead. If your portfolio happens to be a dud-free, well-oiled machine -- congratulations! But if you find that you own a couple of underachieving laggards -- which is likely, considering that three-fourths of actively managed funds trail the S&P over the long-haul -- it may be time to search for replacements.

For anyone seeking a little guidance in that department, I recommend taking a test-drive of the Champion Funds service, which relies on the strictest grading criteria to find the most elite funds in all corners of the market. A risk-free trial to the newsletter will shine the spotlight on some outstanding choices to round out your portfolio, perfect for the time-starved investor who has other things on his mind -- like getting back to that football game.

Fool contributor Nathan Slaughter is hoping for a Peach Bowl victory for the LSU Tigers. He owns none of the companies mentioned. Dell is a Motley Fool Stock Advisor recommendation. The Fool has a disclosure policy.