Question from a rookie investor: when you have a strong conviction in a current holding, one that you’ve even added to in the recent past, and it’s had a dip in price that makes you want to add some more, but it’s already a high allocation of your portfolio, whaddya do?
What wins out? Keeping one holding from exceeding a certain %? Or the strong conviction in the future of this holding and the buying opportunity? Do you stick to your guns or do you say, eh, a few more % won’t hurt, especially when this stock has a bright future and the current dip seems to be just noise? Plus what happens when that holding increases as expected? It will become even bigger, %-wise, assuming everything else remains the same.
And just to muddy the water a bit further, what if you know you’re going to continually add to the portfolio monthly going forward, which will also effect the % size of existing holdings?
Being a rookie, and starting out with a small amounts, adding “minimal” positions are still sizable when it comes to % thanks to that good ol’ small number magic.