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Sell-Side Logic
Over the course of my investment journey, I have built a very defined buy strategy. However, I have not given much thought to selling.
My minimum holding period is 3 years, and I am starting to pass that mark with a number of holdings. What do I do with these holdings now that they have hit the target date?
My initial sell strategy:
- Sell only on routine, quarterly review schedule
- If the position size is larger than my target weight after 3 years, sell 25% of over target quantity
- Sell an entire position if it is less than 1% of overall portfolio after 3 years held
A few of the gaps/questions in my existing strategy that I have been asking myself:
- Just because I have held an equity for 3 years and it is overweight, should I arbitrarily sell potentially great companies?
- Should I continue to to hold underweight positions after 3 years, just because they are underweight?
- How do I factor in performance?
I spent some time thinking about these questions as I reviewed my portfolio this weekend. My investing goal is to continually iterate and improve upon my portfolio as time goes on. I have built my Scorecard to guide my buys. I thought I can also use my Scorecard to point out weaknesses in my portfolio. I decided to calculate the median of my portfolio Scorecard holdings. I chose median since average should be skewed as portfolio continues to develop. Using the median I developed this new rule:
- Sell if the holding Scorecard score is less than portfolio median
This will also provide better clarity on what long term holdings to continue to hold. This rule answers all three of my above questions.
One last question I have to answer for myself - Sell all if this new condition is met, or sell in increments?
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