chris wrote:You only rebalance when you have to. It was 10 years before I felt the need. Then I set the limit for no more than 10% in a single share. If I had stuck to that 10% limit, it would probably be no more frequently than every 3 years, if that.
This makes no sense whatsoever and is totally bizarre. What you are saying is that in the early years when you have very few shareholdings and in a time where a significant over-concentration can occur, there is no need to rebalance. However, after a few years , you can put a very loose filter on to avoid over-concentration but when you get to 30+ shareholdings you need to really trim this down so that you make a lot more changes to your portfolio to avoid this problem. If trimming to avoid over-reliance has any merit, it is in a small portfolio in the early years. However, the HYP proposed had 30+ constituents and since you seem to take that as a sign that there needs to be more emphasis on rebalancing, then surely it would be good to use your method to see what impact that has on performance. Here I am not talking about the value of the shareholding but the dividends achieved every year. It would seem that there is a real concern about this method being tested...?
It has saddened me that this has morphed into a discussion about unitising, because an emphasis on that is largely an intellectual one for those that want to analyse how they are doing - and no harm in that, but it is not a key concern for me. I am with Moorcroft in that the real number I am concerned with is how much am I receiving in dividends, is it rising and is it enough to live on?
If TJH's portfolio doesn't do well, he has less to leave to his beneficiaries; if mine doesn't do well, I don't eat!
At the time, I had about 18 holdings, soon to rise into the 20s.
When one share rose considerably, I got worried. Presumably you would accept a single share rising well above the average. At what point would you feel over exposed? 25%, 50%, 75% or where?
I have given the example of the then Imperial Tobacco, which I had occasion to trim by 25% on five occasions and to sell two nil paid rights. Left alone it would have risen to 50% or more of the portfolio value. Each time the proceeds went into a higher yielding shares than IMT, so the dividend income from the portfolio and from the theoretical income unit rose. Elsewhere you will find my reports, indicating that the dividend per income unit has rise from an initial 2.83p/unit to 32.13p/unit in the last financial year. Meanwhile the unit value has increased from £1.00 to £6.22 at the end of the last financial year. Over the same period the FTSE100 rose from 1949 to 7662, about four-fold.
I am happy to publish those figures.
TJH