A lot of focus is on choosing and buying stocks at the right price.
How often do you review the portfolio after a set period, e.g. 3 months, 6 months etc and take profits?
Is there a good approach for cutting poorly performing stocks from the portfolio, e.g. dropped more than 25% in value?
Hi,
I have two different approaches for this.
I have a buy and hold portfolio of about 12-14 stocks (varies, but usually in this region) and I look at them probably quarterly to see if I still want to hold them (i.e., are the reasons for buying them still valid, long term steady sustainable growth, probably with a decent dividend too). I would only sell outside of this review on a major occurrence, (major mis-information, CEO leaving, fraud, etc. Not necessarily automatic sell on the CEO leaving, but always on the other two).
Then I have a smaller set of other stocks that I manage more actively. I manage these partly with stop losses. Some people sell a stock when they are happy with a certain percentage that they have made. Personally I use my stop losses to do this, I push the stop up behind the price. In this way, I never deliberately sell a rising share. I might miss the very top, but I often get extra gains that I may have missed selling on instinct. The downside to this is I might get stopped out if the share falls back, only to regain its momentum and rise again. But at least I have protected most of my capital (initial capital and gains) and I can always choose to buy back in again if I think its worthy (it usually costs me a couple of percent with more liquid stocks with a small price spread).
Really, I guess there is no right or wrong answer, people will swear by their own system, but actually its whatever works for the individual and the time they can dedicate to watching their picks (and the number they are trying to juggle). This split approach works for me with around a dozen held passively and reviewed and around 6 managed actively. 20 in all, but only 6 needing a close eye.
Be interested to read other approaches to this.
