I have been a MF investor for more than a decade. I have built a nice portfolio - BUT I now have over 120 stocks, because I have I think every newsletter published. So, how does one unwind a portfolio of that size, and go from 120 stocks to 10-12, that would mean investing a few hundred thousand plus into each stock pick! Some of you must be doing that times X. Pushing that button on a purchase for amounts that high would clearly make my fingers shake!! I am very happy to owning many fewer stocks and improving my rates of return.
I have read nearly 5000 posts (yes, my lips are tired from all that reading - I was a Marine fighter pilot, so speed reading is not my strength)
I think you give fantastic insight - Saul is a hero, and many others rank with him, so thank you for all the guidance.
If an offline discussion is more appropriate please let me know and I will provide details.
Thanks Steve Manzi for turning me on to this great forum.
I am far more of a newbie than you, having only started investing in individual companies in October of 2014. That said, I would suggest that you try to avoid thinking you need to trim your number of holdings all at once. Set up a plan that is manageable, maybe plan to decide on a set number of companies to trim per set time period (2 per week to 5 per week, maybe?). Start by picking the holdings you feel like have the least potential for future share price appreciation and start making bite-sized changes to get down to whatever you decide is your target level of concentration.
As still a newbie, I feel very fortunate to have found this board prior to getting above about 15-20 positions. That should continue to give me the advantage of never having to go through a major culling process during my investing career.
Easy answer. Keep the top 25 performing stocks, sell the rest. Consolidate into your winners that are still winning. Add newer winners to replace any of your top 25 6ou don’t much like. Culling no down to 15 the f you want w same process. 15 should be your minimum, 25 is more than enough.
Tink
I’m currently holding 9 stocks (ayx, ipgp, mdb, tlnd, jd, okta, payc, pstg and dswn). Planning on selling dwsn and have money for 3 new full positions in this Roth account. I’m limited with my work 401k so this port is different. Thoughts on stocks with good valuation and long term prospects. I might even consider overweight in some I already own.
I have 9 “Saul” stocks and three others. (AMZN, GOOGL, CDW) I find it difficult to keep up.
The one developer conference keynote that I watched for NVDA took a chunk of time. Listening to conference calls is not happening as often as it should.
Woah! Some considerations before you drastically change your style of investing.
1)Do you really need to? Will your current rate of return allow you to reach your goals?
2)Do you really want to have to listen to every conference call, follow all the boards and every news item on your stocks? Does that sound like fun? Or does it sound like work?
3)Have you considered the tax implications?
4)Are you willing to keep selling and updating your portfolio when things go wrong with one of your holdings (because it will and you will have to)?
I’m only pointing out the above because what you are proposing is extreme. Make sure you have a clear path and know exactly WHY you are doing what you are doing.
I would suggest that you try to avoid thinking you need to trim your number of holdings all at once. Set up a plan that is manageable, maybe plan to decide on a set number of companies to trim per set time period (2 per week to 5 per week, maybe?). Start by picking the holdings you feel like have the least potential for future share price appreciation and start making bite-sized changes to get down to whatever you decide is your target level of concentration.
volfan84
Thank you very much for that advice. I will try to build a spreadsheet and look back at the historical ROI year over year, and apply Saul’s technique of looking at the revenues and growth and then slowly wind down. Any advice on max amounts to invest at once or do you slowly roll those in too?
Many thanks,
GaFez
Sorry that I can’t figure out how to italicize the cut and paste! That is next
Thank you for your service to our country, GaFez. I always feel safer when a Marine fighter pilot is onboard!
You will find some of the most astute investors I’ve ever seen on this forum. Yes, Saul is a hero and so are so many others who unselfishly contribute to this wonderful board.
Easy answer. Keep the top 25 performing stocks, sell the rest. Consolidate into your winners that are still winning. Add newer winners to replace any of your top 25 6ou don’t much like. Culling no down to 15 the f you want w same process. 15 should be your minimum, 25 is more than enough.
Tinker
Thank you Tinker for the answer! I purchased the Rising Stars, Partnership Portfolio, Crypto, (yeah a lot invested in those letters). Do you recommend keeping some of those new recommendations and culling out the older holdings even though they have 4, 5 bagger returns? From what I have read in the threads I should take the emotion out of it and just go with the numbers. Just hard to drop some of those - Amazon, Tesla, MTN and many more - but I realize I am losing a few basis points by holding some of those.
Thank you very much for that advice. I will try to build a spreadsheet and look back at the historical ROI year over year, and apply Saul’s technique of looking at the revenues and growth and then slowly wind down. Any advice on max amounts to invest at once or do you slowly roll those in too?
For the italics, you use html tags, like this but without the spaces < i > for the start of where you want the italics, and then < / i > to end the portion to be italicized. You can also use a b for < b > bold < / b > text. You can also use < pre > and < / pre > to have only a portion of a post formatted as a table.
For the amounts to invest at once, I would say thinking in terms of percentages is better than total amounts. Many folks in Fooldom recommend starting a position by buying it in “3rds”. When I mention “3rds”, I like to put quotation marks around them to indicate that I don’t think one should worry about trying to make them be exactly equally-sized or that you can’t stop with only 1 or 2 purchases or that you can’t add to a position a 4th or 5th time or more. Saul uses similar tactics, with often opening a small starter position with around 1% of his invested capital. On rare occasions, like with Alteryx (AYX), he bought a “full-size” position to start with (which was around 6% in that case). To determine the sizes of the “3rds” you might want to buy, you should first try to figure out the target allocations for your positions (which will be related to the total number of positions you plan to get down to, of course). Assuming you won’t be using any appreciable margin with the account (which would be ill-advised), your total allocations (cash included) will obviously add up to 100% (plus any tiny margin amount, if you choose to use any…which should definitely be kept small).
I would suggest that you try to avoid thinking you need to trim your number of holdings all at once. Set up a plan that is manageable, maybe plan to decide on a set number of companies to trim per set time period (2 per week to 5 per week, maybe?). Start by picking the holdings you feel like have the least potential for future share price appreciation and start making bite-sized changes to get down to whatever you decide is your target level of concentration.
That’s really a good suggestion by volfan. If you sell two low confidence stocks out of 120 per week, you would only be re-allocating about 2% of your total invested assets at a time, which will make it a lot less scary. And if you divide that 2% of your cash between your 10 highest conviction stocks, you’d only be adding 0.2% of your assets to each at a time, also less scary. And your 10 highest conviction stocks may also change over time, which is normal.
You will also need to quit adding every recommendation you hear about to your portfolio unless it’s higher conviction than some other holding, because in a week you add a new stock you have to sell 3 old ones instead of 2. In six months to a year you will have a much more manageable portfolio.
Woah! Some considerations before you drastically change your style of investing.
1)Do you really need to? Will your current rate of return allow you to reach your goals?
2)Do you really want to have to listen to every conference call, follow all the boards and every news item on your stocks? Does that sound like fun? Or does it sound like work?
3)Have you considered the tax implications?
4)Are you willing to keep selling and updating your portfolio when things go wrong with one of your holdings (because it will and you will have to)?
I’m only pointing out the above because what you are proposing is extreme. Make sure you have a clear path and know exactly WHY you are doing what you are doing.
Peace,
Dana
Thanks Dana - Excellent points! Fortunately most of my investments are in IRA/RothIRA/401K so I can avoid some of the tax implications. I am two years from retiring as an airline pilot, so I do have time on layovers to search/research stuff, but it is clearly not my sole passion. I can put a number of hours in to it each week. I am so impressed with the better returns Saulist’s earn and a few percentage points can have a big impact on a portfolio.
Just hard to drop some of those - Amazon, Tesla, MTN and many more - but I realize I am losing a few basis points by holding some of those.
Not knowing your tax situation, from that list, I would suggest keeping Amazon and definitely selling Tesla probably as one of your first holdings to jettison. Tesla’s rise in recent days has probably been a bit of a gift to provide a good time to exit. I am very leery of their liquidity position. MTN, I think that is Vail Resorts, might be one to keep but that could be a tough call.
Never heard of anyone have 120 stocks? I have been investing since late 1980s, and still have a few of those!!
Branmin -
Some small positions, 25 new ones from Partnership Portfolio, 40 from Rising Stars, etc. I pretty much buy the recommendations from SA, RB etc. I do sell plenty too. More than 150 trades in the last year, but as one of TMF guys mentioned, I have just built my own mutual fund - so I said “ok, let’s roll with that strategy”. I also have a number of TMF mutual funds. Just counted my holdings and it is actually 133 stocks! Yikes.
I have been investing since late 1980s, and still have a few of those!! Msft, PG, HD,
I’m also a newbie like you, started investing in 2017 and I have 18 stocks for the moment.
In my opinion you shouldnt look to much at the amount you invest in a stock, but instead look at the percentage.
For example, if you are interested in a company, maybe you want 8 % of your portfolio in it. But if your conviction is not high enough, maybe start with a 1 or 2 % start postion (or whatever percentage) and then ajust later when your conviction changes.
culling out the older holdings even though they have 4, 5 bagger returns? Yesterday has little to do with today.
Sn e exception might be if you bought a stock at a small proportion of today’s price and it has matured to where it is paying something like a 20% dividend based on purchase price. A dividend more than you could expect from average stock appreciation. As long as the company is viable.
In an IRA long-term vs short-term does not matter.
Keep the top 25 performing stocks, sell the rest good advice. Nobody can keep track of more than 25 stocks. Actually I find it hard to keep track of more than 15. That 15 might include a couple of stocks that have not been top performers but where I can see a path forward, ones surrounded by FUD. FUD that I consider to be bogus.
That’s really a good suggestion by volfan. If you sell two low confidence stocks out of 120 per week, you would only be re-allocating about 2% of your total invested assets at a time, which will make it a lot less scary. And if you divide that 2% of your cash between your 10 highest conviction stocks, you’d only be adding 0.2% of your assets to each at a time, also less scary. And your 10 highest conviction stocks may also change over time, which is normal.
You will also need to quit adding every recommendation you hear about to your portfolio unless it’s higher conviction than some other holding, because in a week you add a new stock you have to sell 3 old ones instead of 2. In six months to a year you will have a much more manageable portfolio.
And welcome to the board,
Saul
Thanks Saul - I will make this a long term project and begin whittling down! I will also apply a different focus on the recs from TMF posts I get, like everyone else does, and stop buying as new ones without my own do diligence based on the techniques learned on this board. I previously just said “they did the work for me” went with the flow and then dumped ones that I didn’t like as I scrolled through my positions! The trouble was many of them look really good - as a rising tide rises all stocks - and it is hard to not just view the Total Gain % and say it is doing well so let it roll. I understand from reading your guidance at thread 1, that I have lost many basis points using that technique and with a nice portfolio that becomes too much money to leave on the table! Your guidance has really opened my eyes to how to invest more efficiently.
