written by reader Hi Travis, % portfolio question

By vjhiii, February 11, 2021

First let me say I really appreciate your work. I have been a member for a few years and basically started investing at that time. My portfolio has done well, most of it is based on your personal trades and a few others from the informative comment threads. I don’t execute everything, maybe a third of what you do mostly due to funds available and my personal interest in a market segment. My question is regarding percentage of portfolio specific to my stock portfolio. I don’t believe any of my purchases was worth more than 3 or 4 percent of my total holdings at time of purchase. However, I now have a few (GAN, PACB, ACUIF) that have grown into the mid teens in terms of percent of portfolio. I noticed your largest stock % of portfolio is under 7 percent. I was wondering if you let % of portfolio dictate your trading, is there a specific “weight” that triggers a personal rule of risk management. I currently own 23 stocks and do try to spread risk considering market segment. I guess I would like to know if a single stocks percentage, regardless of how heavily you are weighted in that market segment with other related stocks, might make you sell (or buy). Happy to hear your thoughts and others regarding this subject.

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Travis Johnson, Stock Gumshoe
February 11, 2021 7:04 pm

That’s very personal, but I do think that “sell some because it has reached an uncomfortable weight in the portfolio” is a reasonable approach. It’s just that everyone has a different percentage number.

It will dampen the volatility and probably feel better to do that, though it will also probably hurt your overall returns if you’re investing in growth stocks. Over the long run most of your returns (and a chance for beating the market averages) will likely come from the best 10 percent of the companies you choose. Don’t just sell because you turned out to be right… but do know what level of volatility you can live with.

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