crimsonghost747
Unregistered
I'd be interested to know what sort of strategies everyone is using to determine the amount that a certain stock or sector is from the portfolio total? Do you change your balancing strategy or is it always the same? What happens if a stock goes over the limit? Is the balancing strategy the same throughout your investing "career" or will it change depending on if you are in the accumulation or spending phase?
Currently I don't have a real strategy when it comes to balancing but I realize that this might have to make one at some point. So looking forward to hearing all of your tips. I'm mainly considering a stock based balancing strategy but feel free to discuss both sectors as well as balancing between different instruments such as stock, etfs, bonds, cash, gold etc.
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I don't worry about that too much, but there are a couple of things I do. I turn DRIP off if something is too large or I want to shift my asset allocation out of a certain industry, so that's a passive (& free!) way to slowly rebalance. But the bigger impact comes from my pooled dividends that get deployed. That will change your asset allocation.
Besides those two actions, I don't really worry about it. I realize that every business and every industry will ebb and flow throughout my life. I try to buy when a business or an industry is at a low point.
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My portfolio business plan suggests selling a portion of my holdings when it exceeds 8% of the portfolio. I often do what DividendGarden does when I'm near that point. I've also sold a few shares of a way overvalued (in my opinion) stock when I wanted to add another company to the portfolio to diversify further. Usually I've felt equivocal about those decisions but that passes after a while.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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For the construction phase (3 yrs) I decided to do a deposit weighting. I allow a few double positions (AAPL). If a position would double over night I might take some and buy more income elsewhere. After the construction phase perhaps a capital weighting (deposits plus realized gaines). The distribution phase is far, so I have no idea. Maybe a mixture of market and income weight. If something goes over the limit I would probably let it run and use a trainling stop loss. I guess it will also depend on the income: what we will have and what we need to secure. So at some point I might want to sell a portion of AAPL and buy IBM for example ;-)
