Hi AIMster
If you're in a position to reinvest dividends then a method that works reasonably well is to be 100% in stock and rebalance at the individual stock/fund level.
Reduce a holding whenever any individual holding exceeds x% above the median. That way no one stock becomes excessively overweighted relative to the whole (reduces the cost of any single stock failing).
For example if you have $3000 invested in each holding, and perhaps you select to rebalance at 33% levels, then whenever any holding reaches $4000 you sell $1000 and either add those proceeds to a stock whose value had fallen to $2000 or accumulate the cash/dividends to add a new stock to the set once $3000 was available.
Equally if you have say $1000 spare cash when no stock is selling down, then you can add those funds to a stock whose value had declined to $2000.
With reasonable diversification you also capture sector cycles using this approach.
I know of someone who has used this exact same method for decades with considerable success.
With Foliofn I guess you aren't restricted to trading perhaps minimums of $1000 and could apply the concept using smaller amounts enabling wider diversification. Just wish we had a similar offering available over here.
Best regards. Clive.
Stocks/Bonds/Managed Futures
Stocks/Bonds/Managed Futures
