Slightly off topic - Portfolios

Someone asked me a question off-board that I thought was good enough for all of us to digest. I hope this person doesn’t mind me quoting it here:

I tend to find myself short of cash when market sell offs occur and opportunities abound, and I believe this results directly from an inability to sell when my individual holdings are doing well and somewhat “toppy.” Do you have any insight or rules you might share on when you trim positions to rebuild cash cushions, something that might help take emotions out of the limelight?

First of all, I think I do probably look at valuation more than Saul (he doesn’t really look at it at all usually), so take that with a grain of salt. But also, Saul did mention this morning:

By the way, as I always do, let me urge you to keep enough cash set aside to weather one of the major crashes without having to sell at the bottom. Tariffs and trade wars and rising interest rates can certainly crush the economy after a while.…

I think there’s a big distinction between those with money coming in (from salary or whatever) and those who are living off their investments. It’s reasonable for those in the latter group to keep more cushion, obviously.

Staying mostly fully invested is my policy, and I believe is also Saul’s. My opinion is that the way to think about selling should be position-specific. That’s why I’ve started to give conviction status on my holdings. I’m quite ok with Shopify, Square, or Wix and 10-15%, but I would not feel comfortable letting Nutanix or Alteryx grow over about the 8-10% range. Therefore when AYX grew above 8% of my portfolio this week, I trimmed a small amount (11% of my shares in the company). Some others might be far more comfortable with a larger position there, or in any stock, but I strongly advise not letting any position get over 15%, no matter how comfortable you are with it. It could simply flounder for a while, despite great company results, because that’s just how the market works. Even if your #1 stock does well, your others might do just as well or better, so there’s really no reason to allow a stock to grow above 15%, no matter how much you love it.

Honestly, that’s my answer – my cash cushion comes from simply holding positions to the sizes I’m comfortable with. Of course, it would have been even better if I’d just owned Twilio or TTD with all that extra money, but I own the things in which I have conviction. Maybe just the ones that sing a special tune to me.

My purpose in this post was to:

  1. Affirm Saul’s reminder which I’ve quoted above – especially for retirees!
  2. Offer an answer to the email I got

…but I’d appreciate it (and I think Saul would) if any follow up questions could be made on this other board, on Portfolio Management:…

Saul’s board is about growth stocks, after all.



For me I trade around my cores to raise cash. I do not have an external source of income such a as job other than what I make day trading. For example when FB was hit by privacy concerns I bought it all the way down to 149.90 (up to a 35% overweight)and when I recovered to mid 190s I sold the overweight. I had and overweight in SHOP and when its growth slowed to 62% I also took off the (25%)overweight and raised cash. In order to take advantage of what I perceive as bargains I do have to always keep a modicum of cash available.



Hi Bear,

As a new investor your posts and explanations on portfolio allocation and on your portfolio for July 2018 are extremely helpful, insightful, and much appreciated! Just a note to say thank you!

Have a great weekend.

All the best,

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