Deleted
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Post by Deleted on Oct 28, 2021 21:11:34 GMT
How do you folks decide what % of your portfolio value to put into an investment - Stock and MF/ETF?
How much do you put into the position initially and then do you purchase more as it falls or rises?
The problem I am having is I buy very small positions (1% of Portfolio Value) initially and then 6 months later I realize it has gone up decently and then I am not sure if I should buy more at higher prices or not.
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Post by xray on Oct 28, 2021 21:40:06 GMT
@waffle , Your: How do you folks decide what % of your portfolio value to put into an investment - Stock and MF/ETF? How much do you put into the position initially and then do you purchase more as it falls or rises? The problem I am having is I buy very small positions (1% of Portfolio Value) initially and then 6 months later I realize it has gone up decently and then I am not sure if I should buy more at higher prices or not. ---------- Every investor invests differently and to what they have developed as their own individual "strategy" for the numb3r of shares they use to buy securities for their portfolio [with some exceptions of course (in "LOVE" they make mistakes IMHO)]. With that said.... My [sole] individual system for buying [with some exceptions]: Guidelines: excel worksheet utilization Risk [Rf] assessments built into excel worksheets 16 securities in portfolio [minimum] 6% maximum consideration maximum for securities in portfolio Phase #0 [0-2%] .... No Risk [initial buy] and consider that the 2% maximum cannot affect portfolio if the security went south.... Phase #1 [2-4%] .... Low Risk [added shares] and considering that MktPrc went lower than original initial Buy.... Phase #2 [4-6%] .... "Normal RisK" for portfolio and usual "STOP" for a single security ownership.... Phase #3 [6-8%] .... "At Risk" [Familiar with security over time] and usually a "Double" stop [total understanding of what we & the "Insiders" are doing].... Phase #4 [8-10%] .. "HIGH RISK LEVEL" [total understanding of the "HIGH RISK" being taken and "why" buying more [understanding the trigger].... Phase #5 [>10%] ... "VERY HIGH RISK" [Familiar with security over "TIME" + extraordinary event happening [DANGER-should Bad News event cause -50%]... One single opinion of the many I am sure....
Live Long and Prosper....
Additional Comment: Many of us do "NOT" go over Phase #0 if in a taxable account. If wanting to go over the 2% maximum , we would normally buy into our non-taxable and sell the taxable [which normally has a dividend component]....
Live Long and Prosper....
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Post by Fearchar on Oct 28, 2021 21:41:18 GMT
Probably the most important decision is how much to put into Bonds versus Equity. Big picture, are you Aggressive, Moderate or Conservative investor. Aggressive: <20% in Bonds Moderate: between 20% to 70% in Bonds Conservative: more than 70% in Bonds. Of course, it's very subjective as to where one falls in that spectrum.
After that, decide if it a core holding or not. Core holdings being of high conviction or extremely long holding periods. However, after a good number of years the % in a particular stock isn't always a conscious decision. Rather it's the consequence of not selling too quickly.
In my 91 year old Moms situation, she has owned the predecessor of SPGI since the 60's and it has just grown to an outrageously outsized position. I have no idea what % it was originally. Similar situation with FOCPX, which was purchased in the 80's and is up well over 1000%. John Deere is another example. Dad bought a tractor 20 years ago and thought to put even more into DE, since he really liked the tractor. It is also up big time since that time. All long term capital gains!!!!
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hondo
Commander
Posts: 148
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Post by hondo on Oct 28, 2021 21:46:56 GMT
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Post by Fearchar on Oct 28, 2021 21:47:56 GMT
opps, correction:
FOCPX is in an IRA and Roth. So, there will be taxes some day.
FCNTX is in taxable. Not up as much, but 85% of current value are gains.
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Post by roi2020 on Oct 28, 2021 22:16:02 GMT
I'm predominantly a fund investor although I do own 1 stock. My funds are located in a 401(K), Roth IRA, HSA, and a taxable account. I try to keep individual positions between 5% - 20% of my total portfolio. The single fund which comprises my HSA is an exception since it is only ~ 2.5% of my total portfolio. This is due to HSA contribution limits...
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Post by steelpony10 on Oct 28, 2021 22:28:28 GMT
How do you folks decide what % of your portfolio value to put into an investment - Stock and MF/ETF? How much do you put into the position initially and then do you purchase more as it falls or rises? The problem I am having is I buy very small positions (1% of Portfolio Value) initially and then 6 months later I realize it has gone up decently and then I am not sure if I should buy more at higher prices or not. First of all you have to have a plan that fits your retirement needs. Then when it’s achieved you’re done investing. You only tweak it as your life requirements change. Forget current headlines and future prognosticators because if you did it correctly your plan covers your current basic needs and long term tweaks if needed. If you’re inexperienced add in slop for the following. For example, so much to supplement SS plus any other income to pay the monthly bills. For most, SS raises cover half that inflation rate each year. You’ll be drawing down say 20 years of a bond fund like PIMAX/PONAX, VYM a HY equity ETF or your favorite highly rated fund yielding 2%+. Now the basics are covered. The extras can be whatever you want. Just don’t make it a chore unless investing is your hobby or addiction. At least the bills are covered for 20 years+. We have two types of bonds sections. One to supplement SS and the other as a miscellaneous set aside or for slop. Our third section is for growth who’s capital gains buy the extras. Please note we hold about 20 positions and once you set the bond fund dollar amount to supplement SS the rest of your portfolio is open because it isn’t really needed month to month. Ours worked out as 40% to supplement monthly bills and we split the rest as 40% growth and 20% for the miscellaneous catch all slop bond fond. I would suggest creating a plan based on dollar amounts which is easier to do and maintain and ignore the wall of woe. Equity growth occurs long term and all necessary monthly supplements has a 20% backup on reinvestment.
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Post by Mustang on Oct 28, 2021 22:29:48 GMT
How comfortable are you with losses? If the market drops 50% and your portfolio's value drops 50% are you comfortable with that? A lot of advisors have come up with some very general rules such as the 110 minus your age rule. That "rule of thumb" says you take 110 and subtract your age to determine the percent of equity in your portfolio. If you are 40 then 70% would be in equities. (Some say its 100 minus your age.)
But that is a guideline for retirement investments. My first investments were to accumulate 20% for a down payment on a house. Since the withdrawal was anticipated to take place within a couple of years we went very conservative and invested 100% in CDs and bonds. But usually the young have a much longer planning horizon and can afford to take more risk. Why? Because if they leave it alone they can usually ride out the market drop.
If 50% is too much to stomach then you need to add bonds to stabilize the portfolio's value. For example, an 80/20 portfolio might experience a 40% drop when the market falls 50%. A 70/30 portfolio a 35% drop. And a 50/50 portfolio a 25% drop.Your percentage depends on how much risk you can tolerate and how long you can wait before making withdrawals?
I have a variable annuity (I don't recommend them.) The variable portion lost money in 2008 and because of high fees its cash value just recently got caught up with its guaranteed death benefit which increases 6% per year. It took that long to recover invested in 100% stock. Since it has recovered we moved to more conservative funds to prevent another huge decline in value. Why? At our age we are likely to need to start withdrawing from it in the next few years.
As others have said the percentages are different for everyone. It depends upon risk tolerance and timeline before withdrawals. I've never used it but the 110 minus your age seems to be generally accepted. You might try looking at that and go from there.
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Post by win1177 on Oct 29, 2021 0:21:14 GMT
How do you folks decide what % of your portfolio value to put into an investment - Stock and MF/ETF? How much do you put into the position initially and then do you purchase more as it falls or rises? The problem I am having is I buy very small positions (1% of Portfolio Value) initially and then 6 months later I realize it has gone up decently and then I am not sure if I should buy more at higher prices or not. Waffle, I have a fairly large portfolio, so I typically start with 0.5-1% positions if they are individual stocks or bonds. That still works out to 50K to 100K, so a “big” chunk of change. I will selectively add, building up to about 3%. If it drops, I usually add unless the story has changed. I stop adding to an individual position at ~3%. Obviously this does not apply to well diversified mutual funds. If a stock rises up to ~6%, I will start selling my higher cost basis shares. I have only had to do that with one stock- XOM, which years ago was up to about 14% of our total portfolio. GLAD I started trimming XOM, it has gone on to perform very poorly since then. AAPL and MSFT are each a little over 5%, so I may have to sell some of each. XOM is down to about 4.9%, due to periodic sales in the past and recently poor performance, so much more comfortable with it now. XOM poor performance is a classic example of “individual stock risk”, hence why I now am more careful with individual stocks and using more broad diversified MF’s or ETF’s. Mutual funds and ETF’s are different, in that I will start start out with smaller increments, but I can go higher than 6% due to the diversity of MF/ ETF’s. With a broad market index fund, I don’t limit the size, but I still add usually in 25-50K increments while building out a position. For example, in our retirement accounts, I am changing them from “balanced” funds (Wellington, balanced index) to a mix of stock funds and bond funds. I liquidated the balanced funds, and since the market is high, I have been slowly redeploying the cash into index equity and bond funds, between 25-50K each month. Win
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Post by ignatz on Oct 29, 2021 0:40:11 GMT
How do you folks decide what % of your portfolio value to put into an investment - Stock and MF/ETF? How much do you put into the position initially and then do you purchase more as it falls or rises? The problem I am having is I buy very small positions (1% of Portfolio Value) initially and then 6 months later I realize it has gone up decently and then I am not sure if I should buy more at higher prices or not. How many decision points are too many?
5 a day?
5 a week?
A month?
A year?
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Post by jongaltiii on Oct 29, 2021 1:23:26 GMT
ignatz I treat my investment plan like a budget. I plan out asset allocation each year based on my risk/reward needs. I allot a certain percentage for each category based on my annual plan. I never or rarely ever change those percentages in a given year. Then, I DCA into each fund that falls in the various categories like International, LC, SC, Bonds (yuck), etc etc. I have a certain percentage for explore… I only invest up to that number. Except for crypto (gambling), I don’t try to time the purchases to rise or fall. I just DCA methodically without regard to a recent rise or fall. This way, it’s pure DCA and not me trying to time the market. The few times I’ve second guessed this pattern and tried to time my DCA- I’ve failed miserably. Not sure this info helps but it’s what I do. Spend a lot of time researching every fund etc. and won’t add it to my annual plan until I’m fully committed to a long term buy and generally hold. I’m not sure if you’re asking about that or what I call “explore” investments like individual stocks or one off investments. That has its own set of guardrails for me.
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Post by oldskeet on Oct 29, 2021 11:57:29 GMT
For me it is determined by the risk profile of the investment and ranges from about 1% to a maximum of 6% of the overall portfolio. Within each sleeve the minimum amount held per position is 5% and the maximum amount is 50% per investment. Naturally, a three fund sleeve will have a larger percent held per position than a twelve fund sleeve. And, yes I have two twelve fund sleeves. They are on the income side of my portfolio. One being my fixed income sleeve and the other being my hybrid income sleeve. In the growth and income area I have four sleeves. They are a domestic equity income sleeve, a domestic hybrid sleeve, a global equity income sleeve, and a global hybrid sleeve. In the growth area I have four sleeves. They are a large/mid cap sleeve, a small/mid cap sleeve, a global growth sleeve along with a spiff and equity ballast sleeve.
All in all how much to buy of each asset class is determined by my asset allocation which is a 20/40/40 mix of cash, bonds and stocks. There are about fifty funds within my portfolio split among multiple accounts with fund totals ranging from about 1% to 6%, of the overall portfolio, with amounts being held based upon their risk profile of not only for the fund but the sleeve as well. The more aggressive and risky, the less held.
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Post by richardsok on Oct 29, 2021 13:52:17 GMT
NHF Mustang -- The old "110 minus your age" formula has been valid for a terribly long time. But today, with equities and bonds BOTH sky high, I wonder how reliable a safety net could such an allocation presently be? As the market has barreled upward by ramming interest rates lower, is it not conceivable that the reverse could occur? -- rising interest rates (falling bonds) pummeling stocks? In the present bond market, I tend to think I'd favor floating rates or very short term paper.
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Post by Fearchar on Oct 29, 2021 17:46:54 GMT
I agree richardsok;
Gov't Bonds and higher quality Corp Debt currently sport negative real yields and have been that way for a number of years. So, it's the new normal. Anybody that considers bonds in the traditional sense is taking undue risk. I'm into PIMIX which is leveraged by shorting negative yielding paper. Doing so is outside of my skill set, but I'm glad that the folks at PIMCO are capable of that.
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Post by Mustang on Oct 30, 2021 8:32:02 GMT
NHFMustang -- The old "110 minus your age" formula has been valid for a terribly long time. But today, with equities and bonds BOTH sky high, I wonder how reliable a safety net could such an allocation presently be? As the market has barreled upward by ramming interest rates lower, is it not conceivable that the reverse could occur? -- rising interest rates (falling bonds) pummeling stocks? In the present bond market, I tend to think I'd favor floating rates or very short term paper. I've never actually used it. I have reduced my equity portion as I grew older but I've always held more equities than recommended by that "rule of thumb." You may be correct. Yields are very low and the PE ratio is very high. If I remember correctly the historic average for price/earnings is around 20. The market might be higher than that but many of my funds are not. To be honest, right now its the equity index funds that concern me not the managed allocation funds.
But with yields so low and inflation on the horizon I'm not sure its time to go heavy into bonds either. I have been reading a little about the upward glide slope allocation for those in retirement. That where the investor starts with a very low proportion of stock the day he retires then slowly adds more as he grows older. It's suppose to mitigate the sequence of return risk. I found it interesting but I don't do that either. With yields so low returns would suck and that adds to the risk of running out of money. Some risk is necessary.
And I don't try to time the market. I'm sure I would be terrible at it. That is what professional fund managers are for and even they rarely succeed. I buy and hold and slowly make adjustments to meet long term goals. Its actually kind of boring.
Like everyone else, I think its all about risk tolerance and mitigating as much risk as possible while still getting acceptable returns. For retirees, how they withdraw money is important. I have greatly simplified our portfolio over the years and have only six funds left. I have one fund in our traditional IRAs. It is a moderate-allocation fund that is around 65% equities and it will most likely stay around that allocation for the duration. But the RMD withdrawal method reduces risk because if that sleeve's value falls so do withdrawals. I have gotten my taxable brokerage account to two funds which together have approximately a 50/50 asset allocation. Using the 4% rule is riskier than RMDs but it provides a more stable income and withdrawing from the best performing fund of the two mitigates some of that risk.
Just this week I went from 100% equity to 85% equity in my variable annuity. I moved the money from a growth index fund and a value index fund into a moderate-allocation fund. I kept the SP500 Index fund and a mid-cap index fund. I still think I'm too heavy in the mid-cap index fund (19% of annuities cash value) but I don't like making too many changes at one time so I'm going to wait before doing anything else. I think the risk here is acceptable because of the annuities' guaranteed 6% increase in its income and death benefits. But I do not recommend variable annuities and would never buy one again. If its cash value ever exceeds its death benefit I'm cashing it out.
Roughly the portfolio is 40% IRAs, 40% annuity, and 20% taxable. Overall I estimate our portfolio to be around 70% equity not 39% recommended by the "rule of thumb." That is in my targeted range of 50-75% equity. I have read a lot about Bengen's research, the Trinity study's research and Pfau's update on the Trinity study. All of that research shows that the highest probabilities of success is with equity in the 50-75% range.
I should note that our circumstances may be different than others. Although it concerns me I think we can ride out a correction. We live off of my pension and social security. Both are increased for inflation. Even though I'm 71 we haven't started withdrawals. We are still accumulating using dollar cost averaging making regular monthly investments. Having a stable, fixed income in excess of our expenses increases our risk tolerance.
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Post by alvinthechipmunk on Nov 17, 2021 10:10:32 GMT
"....Like everyone else, I think it's all about risk tolerance and mitigating as much risk as possible while still getting acceptable returns."
Precisely.
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