How about we talk some on rebalancing our portfolio's. If I understand Lichello correctly, It doesn't matter weather you replace a winner or a loser, what matters is that you replace it with equal value. Thoughts?
I propose this because of the tug of war between selling winners or loser's. Which should you do? I think AIM wants us to do both over time. Thoughts?
Lichello - page 203
Now, the AIM investor does it differently. He bought other stocks on the way down and added them to his portfolio. So even if his original stock has dropped into a senseless stupor, his other stocks are almost certain to participate in the market recovery. Besides, the AIM investor doesn't even have to hold onto that burnt-out stock. He can get rid of it, exchange it for another with better prospects, whenever he feels like it.
Now he suggests closing out a loser in exchange of equal value for a better prospect, but he doesn't rule out closing out a winner for the same reason. Does he?
I think he enforces the point I'm trying to make with this statement.
Page 208
You said something about the original stocks, "providing that they are adequate. If I don't like the way any or all of them are behaving, I can exchange them for other stocks anytime I want to. It's my job to make my portfolio fluctuate. If I can do that with regularity, AIM will do its job to help me reach my goal.
So nothing has substantially changed since I wrote the book. Stocks still go up and down. Some eggs hatch, others rot. And the ideal is still, "Buy low and sell high." But who can do it? Nobody. Except by accident.
Again, I think he makes more of a case for a balance than he does for rebalancing by exchanging loser's for potential runners. I just think that there is not enough discussion on when to cap off the profits and run for the bank. I suggest as Lichello that some hatch and others rot. At some point in time it is proper to kick both from the nest.
FWIW
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