07-11-2013, 09:49 PM
One of my hangups is investors holding equal weight positions and trimming every quarter. 50 - 2% positions.
I know why they do it, I just don't understand why they would want to do it. I get that it's a methodical, unemotional approach and there's safety in numbers.
What I struggle with is why would they want to dilute their best holdings with lesser quality stocks. You do have to be diversified, nobody would argue you shouldn't, it's just where do you draw the line? If 50 2% positions gives you comfort then why not 100? Why pick any number at all?
I hold some rather large (5%-9%) positions in MO, PG, JNJ, WAG, COP, T. They got that big because when I had new money, the best place to put it was in something I already owned. When PG dipped down to $60 a year ago I tripled my holding in the company and feel perfectly comfortable with a 7% position. Would I feel safer or better splitting that position equally among PG, CLX and CHD? Nope.
Anyway, portfolio strategy and proper allocation of money is a topic that has always interested me. I hope some others will chime in. Thanks.
I know why they do it, I just don't understand why they would want to do it. I get that it's a methodical, unemotional approach and there's safety in numbers.
What I struggle with is why would they want to dilute their best holdings with lesser quality stocks. You do have to be diversified, nobody would argue you shouldn't, it's just where do you draw the line? If 50 2% positions gives you comfort then why not 100? Why pick any number at all?
I hold some rather large (5%-9%) positions in MO, PG, JNJ, WAG, COP, T. They got that big because when I had new money, the best place to put it was in something I already owned. When PG dipped down to $60 a year ago I tripled my holding in the company and feel perfectly comfortable with a 7% position. Would I feel safer or better splitting that position equally among PG, CLX and CHD? Nope.
Anyway, portfolio strategy and proper allocation of money is a topic that has always interested me. I hope some others will chime in. Thanks.