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New portfolio strategy
The original concept came about this year when I started investing. Back then I was new to investing (prob still am), I subscribed to MF premium service and listened to their advice.
"Winners keep winning!"
And they always keep adding to their top positions in their portfolio. I was skeptical at first but results did show with $TSLA becoming the top position, 99% Tesla.
Here comes the controversial part. My portfolio strategy.
A bit contradictory to the hold 3-5 years advice from MF, in my own strategy, I would sell some of the worst-performing positions to add to the winners. (10% per quarter).
This will regulate your portfolio to not accumulate under-performing positions over 3-5 years and also prevent over-diversity.
Of course, you can tweak the percentage to sell-off to your liking or even selling every half a year. But I propose selling 10% per quarter.
If 1 year out the stock jumps. (100%-10%)^4 = 66%. You are still in the game about 66%. While after many years and still no signs of movement, you are probably out of the position.
Hence this cleans up the massive diversification flaw of your portfolio.
And 33% from the 66% position would probably be doing well in your winner stock too. Thus, it is really hard to say that u lost money from selling the initial position.
I like this approach - seems reasonable and incrementally over time helps you re-balance. Great way to think about it. I think the difficult part will be certain stocks might appear as "losers" then turn around the next quarter/year etc...
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