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An early rebalancing
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Even though I do not yet have all of the active positions equal (and they never will be exactly equal), I do have many of my stocks between $30,000 and $40,000 total value. My diversification based on capitalization is good, but there is an overweight in microcaps and underweight in midcaps. I also have an overweight in "value" stocks, but that fits my normal investment style. My sector diversification is a bit lacking, and I am more heavily weighted in technology and consumer discretionary (mainly retail stocks). However, I am more knowledgeable in those areas such that the sector diversification makes reasonable sense. Also, we are going into good seasons for technology (3rd and 4th quarter) and retail stocks (4th quarter) so, again, the overweight is more defensible. I simply point this out to summarize my portfolio development at this time. I will discuss my only "sell" of this competition (Cisco Systems) in a later post. This was an "opportunity" purchase of 3000 shares and I divested 2000 shares rapidly once the stock appreciated as I anticipated. Now, I plan to sell some of another position (Research in Motion) if it reaches $82. I am doing this for two reasons: 1) The total position value is approaching $50,000 which is a bit high. 2) The stock is approaching my short-term target of $250/share, or translated to $83.33 per share after the stock split. Therefore, if I sell 200 shares at $82 (previously $246 before the split), I will bring the total position value in line with my target of $35,000. Further, I will have trimmed the position and "rebalanced" at a price nearing my short-term target. To maintain some sense of discipline for selling, I try to set early and final price targets. If a stock approaches my early price target rapidly and I have enough value to rebalance, I will sell part of my position while still maintaining a "full position". If a stock approaches my final price target, I will sell half my position at or near the target and then put a "stop-loss" under the rest of the position. In the case of Research in Motion, my early price target was $250 ($83.3) because that was the lower end of analyst's targets. My final price target is $265 ($88.33). Hopefully I will be able to demonstrate this approach with RIMM. If this explanation was as clear as "mud", then I will revisit this "sell" approach in a later post. Doc | ||
