Been discussed generally on various threads, and many have expressed their view, but not a direct yes or no.
I personally don't worry about re-balancing or even track it.
I would never sell any of the stocks I own just to re-balance my portfolio to some type of percentage or dollar ratio. I would consider selling if the dividend was in real jeopardy.
I might not add to a specific stock if I owned lots of it but that would not stop me from buying it if there was no other choice and the current yield was attractive.
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I haven't re-balanced yet but I could see myself doing it in the future.
My 401k has a roughly equally balanced portfolio of 50 positions. I suppose I would consider re-balancing it if I had something grow to 10% or more of the portfolio and was obviously overvalued, but I haven't sold anything yet to re-balance and I'm sitting on several 50%+ gains.
I'm in an investment club with some college buddies and we are long Under Armour since around $6, so the position grew to represent about 35% of our portfolio value. I tried a few times to get the other members to sell some when it reach $60 but we decided we believed in the long-term prospects for the company and were willing to ride out a downturn. Since then the shares have dropped about 25% from the high. Trimming may have been a good idea in hindsight for the short term, but that would have also triggered large capital gains and would have taken away upside for future prospects in the company. We only meet every other month so this isn't a place where we have active management of positions.
In short, I think there is something to be said for letting your winners run, especially in the accumulation phase. However, in situations where a position has become obviously grossly overvalued I think its prudent to trim back and put the money to work elsewhere. Finally, if I'm relying on my investments for income in retirement, I think its good to spread out the risk and would probably be more active in keeping things somewhat in balance.
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05-09-2014, 11:51 AM
(This post was last modified: 05-09-2014, 11:53 AM by Dividend Watcher.)
I don't think there is a direct yes or no; not, at least, in my case. There are too many variables.
Yes, I've sold a little of my big gainers in both my and my wife's portfolios and I've sold some INTC which wasn't doing anything with the dividend lately and was too large a position relative to where I wanted it. I've also swapped BDX for BAX in my wife's portfolio.
In each case, I used the proceeds to 1.) increase the dividend stream or 2.) to diversify the portfolio without denting the income stream too much. Now that my portfolios are where I feel comfortable and have a couple of outstanding limit orders to get me at the diversification goal in my business plan, I don't plan on doing much else. I'm able to add much more to my wife's account than mine at this time so I can work further on diversifying her as the cash becomes available.
For the foreseeable future, no, there is no more rebalancing expected unless a company really stumbles. Then, I guess it's a matter or trimming or getting out completely and finding a replacement. I don't consider that rebalancing.
I see it perfectly logical for someone not to even consider rebalancing. Depends on your temperment and all the variables that go into how you want to build your portfolio.
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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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Well. I was suggested to read chowder and I believe blog 5 discusses this in a general way.
If you have a bull running hard why cut half of em off.
Though there are some good things about rebalance. Doesn't need to be done.
Jim
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Our long term portfolio's positions have been funded in roughly equal dollar amounts. My expectation is to always accumulate additional shares of various equities. Rebalancing will take place via the allocation of new funds and will probably never happen via the selling of shares. Shares will only be sold if a position appears to get seriously over valued or if the position fails to perform to expectations.
Alex
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When I get a lot closer to retirement, I imagine I will think a lot more about specific allocations and rebalancing. For the time being, I don't give it a ton of attention. My three biggest holdings make up almost 30 percent of my dividend growth portfolio, and almost 20 percent of the total is in tobacco.
I hope that by the time I'm done building it, my portfolio will be three or four times its current size. While having, say, $25,000 in a single stock right now is a large position, percentage-wise, one day it will not be. So if I spend a lot of time and energy rebalancing now, all I'll really do is slow down my performance. As it is, I have the flexibility to go heavily into the best opportunities. In ten or 15 years, I'll try to smooth it out with how I allocate new money. And some time after that, perhaps I'll consider true rebalancing.
