12-11-2013, 10:10 PM
(12-11-2013, 03:20 PM)thefarside Wrote: Sorry for quoting but just a thought - suppose you have 10 stocks in your portfolio A1 - A10, say another one comes up and its better value than half the counters in your portfolio - do you i) add, ii) clear a few counters to overweight or iii) replace to equal weight of a weaker counter? I think it is this that should drive the allocation process.
In real life, it is very rare to have one "Messiah" stock coming by.(Oops.. cannot resist using the word "messiah")
So, in most cases, another one that comes up is more likely to be better but not much much better than what you have in your portfolio. Therefore, the logical choice is to add it to your portfolio using idle cash if idle cash is available. In the case that the idle cash is not available, then it is either a total or partial replacement of some counters.
As to how much to buy or trade with other counters, there are many deciding factors to it and certainly, it is not an easy process. It is only easy if there are already some identified counters that you already had in mind to get rid or do not mind to trade it for a better choice.