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Portfolio Entries and Exits

Ever since I got the green light from my father to manage a portion of the family's fund, I have been thinking non-stop about how I would like to allocate it. I am not talking about splitting it between bonds and stocks. Instead, I find myself asking "How many counters should I have in my portfolio?" 

I don't know why, but instinctively I came up with the idea that I should not hold more than 10 counters (+/- 2). I am planning to divide the total amount of capital up equally and buy 2 counters every quarter so that I will have a total of 8 shares by the end of one year. Going forward, I would relook into those shares that I've held for at least a year and access whether or not the shares continue to fit my investment criteria. If not, I would simply sell them away regardless of the profit/loss and buy the next 2 counters which I like. I feel that having too many stocks on one's portfolio makes it very cluttered and you might as well buy an ETF instead. It saves you on the transaction costs and it's way easier to diversify. 

In a way, I am using a time-stop of a year for my investments instead of having a target price. I feel that it gives me a very systematic approach when it comes to entries and exits. What are your views on this method to take profit/stop loss? Would it be better to instead try to identify each counter's intrinsic value through various methods such as discounted cash flow and comparable analysis? 

Do share your views in comments below, I'd love to hear your thoughts. 

Cheers, 
Darren

Comments

  1. I think you should consider % gains and losses as well as time. It's about avoiding losses especially if you have a concentrated account.

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