IanTHughes wrote: Alaric wrote:
IanTHughes wrote:The cost I am talking about occurs as a result of deliberately foregoing dividend growth that would otherwise create the over-concentration, which is apparently the worry.
Unless you have a reliable crystal ball that tells you which will be the better performer, you are just halving, say, one dividend generator and bringing in another. You do it because you don't want over 20% of your income at risk from just the one share.
My apologies, there is nothing I can do about your failure to understand yet another of my explanations
Well, I'll have a go if I may, because I entirely agree with you that cutting/trimming is a poor portfolio approach.
Markets are asymmetrie in their growth. The bulk of gains come from the outperformance of a relative minority of shares.
If you cut back any share that goes above a certain portfolio weight then you guarantee never to reap the rewards that the aforementioned outperformers give. Even if you hop into a nascent outperformer you will sell it (or some of it) as soon as it goes above a certain level. In other words you are basically sacrificing the engine of asymmetric growth that drives all markets and portfolios. Chances are, after enough such hops, you will sink your money into one of the many poor performers and, presumably, never sell?
It's no coincidence that eternity portfolios, including HYP1, have tended to outperform the market. You can talk about risk until the cows come home but the evidence all points to leaving well alone. The one caveat being to make sure you start with a sufficient level of diversification (min 30 shares from different sectors IMO).
And that's without even considering the 1% minimum transaction cost involved in any buy/sell decision.
As for comments about there being no right or wrong decision that's just nonsense if your aim is to maximise returns. And, yes, whilst also minimising risk if one thinks carefully enough and doesn't just look at an evolved portfolio and point to asymmetry.