Hi Infooverload,
That is correct. I assign a constant value to each stock that doesn't change. To make it simple, with a lot of stocks, I just have the same constant value for every stock.
Of course, you could assign different constant values if you wanted to. For example, you might make your core holdings 4 funds with a constant value of $6,000 each, and have a few stocks at $2,000 each.
Then, each year, I rebalance every stock back to the constant value if it has moved at least 10% (either up or down).
The second part is that I limit the cash portion of the portfolio to 30% (you could use any number - for example, 20% or 50% depending on your agressiveness). If the cash is more than 30%, I will use the excess cash to buy more positions.
So, each individual position doesn't grow - it just pumps out cash. But my portfolio grows because the number of positions increase.
Of course, as the portfolio grows, and you have a lot of positions, at some point you could decide to increase the constant value rather than add more positions.
