I wanted to make a comment about those who rebalance, trim positions because it is too large of a percent of their portfolio, etc. One must consider the investment that they are giving up, and it may not actually be such a good idea.
Rebalancing is becoming a religion preached by Wall Street to generate fees or worse, to make advisors seem like they are earning their fees. Selling your winners to buy more losers never made any sense to me. Selling your winners to offset losers for tax reasons is just as mindless. Selling and taking a tax liability to diversify your portfolio may sound like a prudent thing to do (and I'm not saying in all cases it's not), but consider the fact that even the most blue chip of blue chips have the risk of going to zero. The odds are better that it won't, but you have to consider timing of that other investment and that you can throw away a great investment for a moderate one.
If you want to create wealth, you concentrate it. If you want to preserve it - diversify. People don't understand that as they have been brainwashed by all these Wall Street products that push diversification.
Consider this. My dad was told by a wealth manager that he never saw anyone get rich on penny stocks. He then told him about several of my concentrated positions that put me there. I then asked my father to ask that wealth manager this: How many people does he know that have gotten wealthy off of rebalancing and diversifying? Think about it.
PFHO became about 50% of my portfolio when it was around $3. Would it have been smart to sell it when it got to $6 because it was now 90%? How about at $12, or even $24? It might give you piece of mind to take some off the table, but if that table is the golden goose, you're just feeding other Wall Street turkeys.
The more you diversify, the more you end up being more like an index. And as even only the top 20% of portfolio managers ever beat the S&P in any given year, then why not just buy that index fund?
If that's not enough sage advice, consider one last thing. Most people who got rich HAVE consentrated positions. They have all their money tied up in their own businesses, real estate, or their careers. What is wrong with that? You have fewer things to worry about. And in those cases, they don't have a market quote every second about how much their wealth is valued.
The other advantage of having just one or a few concentrated positions is, you have less to watch than 30 or 60 over diversified positions in a portfolio.
I don't want to have anyone use my style as investment advice, as everyone has to consider their financial position and their tolerance for risk. But I wouldn't have nearly what I do if I even diversified even a bit of what I had, several times over in my life. More risky? Perhaps, but is it really? And will it get you to where you want?
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