The Lemon Fool

I have an imbalance in my IT portfolio and would like to correct it. To do this now, I could sell some IT's which have dropped in value but then buy others which have dropped by more.

Technology heavy IT's have fallen most and I wondered if there was any opinion if this presented a buying (or rather swapping) opportunity.

Top up candidates
SCOTTISH MORTGAGE INVESTMENT -10.7% (in last month)
ALLIANZ TECHNOLOGY -13.1% "
EDINBURGH WORLDWIDE INVESTMENT -16.5% "

There is not as much top holdings crossover as one may imagine, only Amazon and Tesla being held by two, and no company is held by all three IT's (using data from their top 10 holdings). Geographic spread is as expected US dominant with 57% and then China and UK at 9.5% and 7.3% respectively (although this is probably less important as sector spread).

The IT's which I could sell are
FOREIGN & COLONIAL - 6.5% (in last month)
FIDELITY SPECIAL VALUES -5.9% "
MID WYND INTERNATIONAL -7.9% "
WITAN -7.3% "

I am really uncertain if I should adopt the old maxim "Don't do something, just stand there" or take action. Any comment would be appreciated (except criticism of the whole basket of IT's - I have critisised myself enough on this )

In your situation I would not be concerned about the market movements, but more concerned about imbalance.

If you wish to add more holdings, my approach would be to look at those currently overweight and cut them back to provide the funds for the new holdings. If you hold four now and wish to add three more, your current average is 25% and the future average weight will be 14%, so I would think of bringing the existing holdings down to the 14% level and add the new holdings at that level.

TJH

SDH, It's a case of "horses for courses", and what sectors you are seeking exposure to. Technology is down currently. It may go down more or it may recover quickly or slowly. One doesn't know. Do you wish exposure to that sector? If so, put your money in and forget about it.

I noted that growth trusts and technology are more vulnerable in market corrections and I am keeping that in mind, which probably means I shall keep my exposure to those sectors/trusts to a low level. Though note I am an income seeker.

There is no harm in taking advantage of changing price levels to rebalance, though be aware of trading costs.

I would look at the track record over the last five years of the ITs you wish to sell. Did they perform better than a relevant index in which you could have invested in, but much more cheaply, via a tracker? Did their dividends rise faster than inflation? If you knew then what you know now, would you have invested? If the answer is "no" then dump the worst IT and reinvest elsewhere. If not, hold on. Also, I wouldn't bother with too much rebalancing/fine tuning. The process inevitably incurs costs which erode your dividend income or capital gain. In retrospect I shouldn't have done nearly so much rebalancing as I have done. If you can, wait until you have discovered one of your ITs is a real dog, dump it, and rebalance then.

Avantegarde wrote:I would look at the track record over the last five years of the ITs you wish to sell. Did they perform better than a relevant index in which you could have invested in, but much more cheaply, via a tracker? Did their dividends rise faster than inflation? If you knew then what you know now, would you have invested? If the answer is "no" then dump the worst IT and reinvest elsewhere. If not, hold on. Also, I wouldn't bother with too much rebalancing/fine tuning. The process inevitably incurs costs which erode your dividend income or capital gain. In retrospect I shouldn't have done nearly so much rebalancing as I have done. If you can, wait until you have discovered one of your ITs is a real dog, dump it, and rebalance then.

That's an interesting point on the re balancing. As my intention is to have these investments for 5 years plus, I will leave as is for the moment. I shall look critically at the trusts I own to see if I would select them today and sell off if I wouldn't.

EssDeeAitch wrote:
I have an imbalance in my IT portfolio and would like to correct it.

To do this now, I could sell some IT's which have dropped in value but then buy others which have dropped by more.

Are these in the portfolio that you've just set up recently?

I would urge caution - not so much from a financial and 'technical' sense, but really from a more personal aspect....

If you start 'twitching' now, I think you'll find it difficult not to 'twitch' next time (and there will be a next time....), and whilst it's unfortunate that you've experienced this current market malaise early on in your new portfolio's existence, I do think that forcing yourself to assume a 'sit-still' position will do you the world of good over your investing-years ahead.

This isn't to say doing so is easy, but it is worthwhile....

With that said, I would agree that some form of re-balancing can be useful with any new funds, or funds internally-generated by the existing portfolio - that's standard portfolio-management that's a world away from the sort of selling and re-balancing that you're thinking of here.

Doing it that way is also generally performed over the medium term, which is a huge benefit compared to what sounds like really short-term thinking in terms of selling some holdings now that you've really not held for too long...Starting down that road then makes it more difficult the next time the market takes a bit of a bump, and you'll find it really difficult to become comfortable at all with your holdings if you allow yourself to think so short-term like this.

Just my opinion, of course - and you really must do what you think best.

Good luck with your decision.

Cheers,

Itsallaguess

Itsallaguess wrote:

EssDeeAitch wrote:
I have an imbalance in my IT portfolio and would like to correct it.

To do this now, I could sell some IT's which have dropped in value but then buy others which have dropped by more.

Are these in the portfolio that you've just set up recently?

I would urge caution - not so much from a financial and 'technical' sense, but really from a more personal aspect....

............................................

Just my opinion, of course - and you really must do what you think best.

Good luck with your decision.

Cheers,

Itsallaguess

I have recently set up this portfolio and in truth, had I more funds available I would probably have topped up the biggest losers as I will be holding them for some years. I "twitched" but I suppose that is natural, but not to the extent where I sold anything. But I was searching for a way to get the best out of a poor situation.

The broader question was "is it good practice to sell off some losing stock to buy other stock that has lost even more" provided there is still confidence in the stock one wants to top up?

My decision based on what you and others have said is to do nothing for the next three to six months; keep the portfolio under review and rebalance if necessary.