After a reporting season, there has often been a lot of movement within a portfolio.
Some investors take profit from the good performers and invest it back into the not-so-good performers. Others look for value in new stocks but then run the risk of growing the portfolio too large without disposing of potentially good value stocks.
What are recommended ways to re-balance a (growth) portfolio?
A: Thanks for the question.
There is no right or wrong way to re-balance a portfolio. As I use a top down approach, this is how I approach it:
- Compare current portfolio sector weights with current market sector weights. Are the sector biases where I want them to be?
- If not, how are they different? Are they worth addressing?
- If so, what stocks do I buy, add to, sell, or partially exit?
- Notwithstanding the above, are there any other stocks that are troubling me that I should consider exiting – or have performed so well and become expensive such that I can’t see the value in holding? If so, what will I replace them with?
Hope this helps
