Suppose I have a portfolio of 10 stocks, each allocated a 10% share of the portfolio. Over the course of a few months, I notice that some of my stocks have grown, while others have de-grown. Therefore, for some of the stocks, the portfolio share hypothetically becomes 15%, and for a few others, it reduces to 5%. Now, business fundamentals and investment thesis for all 10 stocks has not changed. In such a scenario, do you
- Deploy extra cash into the stocks with 5% portfolio weight so that their weightage increases? - increase your portfolio size
- In case you don’t have much cash, do you sell a part of the stocks that have increased their portfolio weightage to 15%, and then use the proceeds to increase the share of the de-grown stocks? - keep portfolio size the same, but change the mix of stocks
- Do nothing, and follow a coffee-can approach when all the stocks are secular compounders?
Be it Graham or Lynch, one of their tenets is to not keep reshuffling the portfolio - one because I would incur short term capital gains, and two because of brokerage charges. Also, if there is a multibagger in the stocks that have already advanced, then offloading a part stake in such stocks in just a couple of months ruins the opportunity for outsized returns.
Another way of looking at the question is - how rigid are you in sticking to a particular portfolio allocation over the cycle of an investment. In your multibaggers like Avanti, Kaveri, Mayur, etc., did you stick to a rigid portfolio weight of say 10% for these stocks as they kept advancing, or did you stay invested throughout the cycle (at a risk of these multibaggers became a significant chunk of your portfolio)? How would your answer change for a newbie investor?
Could you share your insights / point me to the relevant threads? Apologize for creating a new thread, I couldn’t find a direct answer in the existing threads.