When (like right now) my portfolio is at or near all time highs, and there are no bargains obviously shouting “buy” at me, other than the stocks I already own, and even some of them are starting to look very expensive, I usually:
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Trim the expensive stocks, just a little. I will never be good enough to sell at every top, but I will use my judgement a little to trim. By trim, I mean 10 or 15% of the position. Altering positions wildly does not go well. If I think MDB is expensive and sell half or all of it…how sick would I feel if it just kept going up and I never got to buy back in? OR if it immediately got acquired at a 40% premium??? Ouch.
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Start new positions instead of adding to my large ones that are expensive. At times when everything seems expensive, I don’t want to jump in anywhere with both feet, so I usually have more small positions (I’ll build the ones that stick later, on dips). I’ve generally held 12 to 13 positions at a time, but right now I’ve expanded to hold 15 or 16 (e.g. I just bought a 2% position in the recent Motley Fool Rule Breakers rec). My large positions are still large (the top 5 make up almost 50% of my portfolio), but the tail gets longer.
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Hold a little cash. Stocks always inevitably dip, even irrationally at times. Nice to have a little cash to scoop them up. To me, holding more than 20% cash is trying to get too cute, but I’ll hold 10% or maybe even 15% if I’m really having trouble finding a “buy.” If I see something really safe I might park some cash there for a few days or weeks.
Request
I hope this is interesting and I’d definitely welcome feedback. But since this is more about portfolio management, it is off topic here. So please, if you’d like to respond, do it on the portfolio management board. I’ve posted it there too: https://discussion.fool.com/when-i-see-no-bargains-34083738.aspx…
Thanks,
Bear