Communications
club_cafe
HelpRegister
Balancing our portfolio
Our club is struggling with balancing our portfolio. We have
had great success over the past few years with 3 stocks
which are now 16.8, 10.7 and 9% of our portfolio. Some
members want to sell some while others still see upside
potential. We currently own 40 stocks and know that if we
sell, we will invest the proceeds, but these stocks
fundamentals are as strong as the stocks we are considering.
So, my question is this: how often does your club rebalance
and how do you determine what you are selling? Do you cap
each stock at a certain % of your total portfolio? Thanks in
advance!
How many members does your club have?

> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>
> Our club is struggling with balancing our portfolio. We have
> had great success over the past few years with 3 stocks
> which are now 16.8, 10.7 and 9% of our portfolio. Some
> members want to sell some while others still see upside
> potential. We currently own 40 stocks and know that if we
> sell, we will invest the proceeds, but these stocks
> fundamentals are as strong as the stocks we are considering.
> So, my question is this: how often does your club rebalance
> and how do you determine what you are selling? Do you cap
> each stock at a certain % of your total portfolio? Thanks in
> advance!
Judy,

Besides how many members you have consider the following as a rough guideline (not an official policy of Better Investing) that no stock should be more than 2 times the average weight of your portfolio value. In reverse no stock should be less than 0.5 times the average weight of your portfolio value.

For example, you have 40 stocks and let's assume your portfolio value is $100,000 (just to make the math easy). That means the average size of a single stock in your portfolio would be $2,500 ($100,000 divided by 40 stocks).

If you say no stock should be more than 2 times the average then no stock should be worth more than $5,000 (2 times the average stock value of $2,500).

And on the small side no stock should be worth less than $1,250 (0.5 time the average stock value of $2,500).

But 40 stocks seems like a bit much for a single club. Your stock updates are around 10 stocks to review every month -- if you review your stocks every quarter.

Then you have a watch list of potential candidates. And then you have new stock presentations and education and administrative matters.

I wonder how you can complete everything in a 2 hour time period.

But using the aforementioned guideline of weighting by no more than 2x the average value of a single stock might get you to weed your portfolio.

Kevin GIllogly
Montgomery County MD Model Investment Club.


On Wed, Feb 10, 2021 at 8:42 PM Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
Our club is struggling with balancing our portfolio. We have
had great success over the past few years with 3 stocks
which are now 16.8, 10.7 and 9% of our portfolio. Some
members want to sell some while others still see upside
potential. We currently own 40 stocks and know that if we
sell, we will invest the proceeds, but these stocks
fundamentals are as strong as the stocks we are considering.
So, my question is this: how often does your club rebalance
and how do you determine what you are selling? Do you cap
each stock at a certain % of your total portfolio? Thanks in
advance!
We have 13 members. We each watch 3-4 stocks and switch them periodically.

Sent from my iPad

> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
>
> How many members does your club have?
>
>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>>
>> Our club is struggling with balancing our portfolio. We have
>> had great success over the past few years with 3 stocks
>> which are now 16.8, 10.7 and 9% of our portfolio. Some
>> members want to sell some while others still see upside
>> potential. We currently own 40 stocks and know that if we
>> sell, we will invest the proceeds, but these stocks
>> fundamentals are as strong as the stocks we are considering.
>> So, my question is this: how often does your club rebalance
>> and how do you determine what you are selling? Do you cap
>> each stock at a certain % of your total portfolio? Thanks in
>> advance!
>
Our club lets the runners run. Why sell when they are doing well. We have sold stocks previously because they have gotten "too big" but have regretted it because they kept on going up. Don't sell on the price but sell on the fundamentals. We will rather buy more of the stocks that are smaller to bring down the percentage of the bigger ones.

John

On Wed, Feb 10, 2021 at 6:10 PM Kevin Gillogly via bivio.com <user*9886100001@bivio.com> wrote:
Judy,

Besides how many members you have consider the following as a rough guideline (not an official policy of Better Investing) that no stock should be more than 2 times the average weight of your portfolio value. In reverse no stock should be less than 0.5 times the average weight of your portfolio value.

For example, you have 40 stocks and let's assume your portfolio value is $100,000 (just to make the math easy). That means the average size of a single stock in your portfolio would be $2,500 ($100,000 divided by 40 stocks).

If you say no stock should be more than 2 times the average then no stock should be worth more than $5,000 (2 times the average stock value of $2,500).

And on the small side no stock should be worth less than $1,250 (0.5 time the average stock value of $2,500).

But 40 stocks seems like a bit much for a single club. Your stock updates are around 10 stocks to review every month -- if you review your stocks every quarter.

Then you have a watch list of potential candidates. And then you have new stock presentations and education and administrative matters.

I wonder how you can complete everything in a 2 hour time period.

But using the aforementioned guideline of weighting by no more than 2x the average value of a single stock might get you to weed your portfolio.

Kevin GIllogly
Montgomery County MD Model Investment Club.


On Wed, Feb 10, 2021 at 8:42 PM Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
Our club is struggling with balancing our portfolio. We have
had great success over the past few years with 3 stocks
which are now 16.8, 10.7 and 9% of our portfolio. Some
members want to sell some while others still see upside
potential. We currently own 40 stocks and know that if we
sell, we will invest the proceeds, but these stocks
fundamentals are as strong as the stocks we are considering.
So, my question is this: how often does your club rebalance
and how do you determine what you are selling? Do you cap
each stock at a certain % of your total portfolio? Thanks in
advance!
I think Kevin got it right.
How do you have time to do industry studies?
We have 10 members and 20 stocks and we can take up 2/3’s of our meetings with quarterly reports.
We do use Zoom periodically to do just an industry study outside of a meeting.
Plus I question how well someone is closely following 3-4 stocks apiece.
You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
That would also improve your portfolio return.

Bob

> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>
> We have 13 members. We each watch 3-4 stocks and switch them periodically.
>
> Sent from my iPad
>
>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
>>
>> How many members does your club have?
>>
>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>>>
>>> Our club is struggling with balancing our portfolio. We have
>>> had great success over the past few years with 3 stocks
>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
>>> members want to sell some while others still see upside
>>> potential. We currently own 40 stocks and know that if we
>>> sell, we will invest the proceeds, but these stocks
>>> fundamentals are as strong as the stocks we are considering.
>>> So, my question is this: how often does your club rebalance
>>> and how do you determine what you are selling? Do you cap
>>> each stock at a certain % of your total portfolio? Thanks in
>>> advance!
>>
>
Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That’s not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I’ve been tasked with bringing options to our next meeting and appreciate lots of feedback.

Sent from my iPad

> On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
>
> I think Kevin got it right.
> How do you have time to do industry studies?
> We have 10 members and 20 stocks and we can take up 2/3’s of our meetings with quarterly reports.
> We do use Zoom periodically to do just an industry study outside of a meeting.
> Plus I question how well someone is closely following 3-4 stocks apiece.
> You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> That would also improve your portfolio return.
>
> Bob
>
>> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>>
>> We have 13 members. We each watch 3-4 stocks and switch them periodically.
>>
>> Sent from my iPad
>>
>>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
>>>
>>> How many members does your club have?
>>>
>>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>>>>
>>>> Our club is struggling with balancing our portfolio. We have
>>>> had great success over the past few years with 3 stocks
>>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
>>>> members want to sell some while others still see upside
>>>> potential. We currently own 40 stocks and know that if we
>>>> sell, we will invest the proceeds, but these stocks
>>>> fundamentals are as strong as the stocks we are considering.
>>>> So, my question is this: how often does your club rebalance
>>>> and how do you determine what you are selling? Do you cap
>>>> each stock at a certain % of your total portfolio? Thanks in
>>>> advance!
>>>
>>
>
My club has max own value and max and min buy values.

PV is current total portfolio value
NS is current number of stocks in our portfolio

- Minimum buy value is cash available at the time, up to 1/3 * (NS+1)*PV. We want the smallest position in our portfolio to be at least 1/3 *NS * PV and the first formula allows us to buy a new stock when we don't have enough money to meet our minimum.

- Maximum buy value is 5/4 * NS * PV. Once this value is reached we will no longer add to our position in this asset.

- Maximum own value is 2/NS * PV. If the current asset value exceeds this amount then we reduce our position, to a minimum of Maximum buy value. This allows us to re-balance our portfolio while continuing to let the winner run without crippling it.

- Sector limit. We also have an upper limit of 30% of PV for any one sector.

Other than that we never re-balance. We also limit the number of stocks we can own to 2 * number of partners. 15-20 stocks is more than enough to create a well-diversified portfolio.

These formulas (guidelines, and we do violate them from time to time) allow us to have meaningful positions in our holdings. Not so small that a 100% return is meaningless to overall value and not so large that a 10% drop devastates our portfolio value. And, not too much in any one sector so that when it corrects that also doesn't devastate our portfolio.

Bob Mann
Lunch Money Investment Club

> On 02/11/2021 8:11 AM Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>
>
> Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That’s not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I’ve been tasked with bringing options to our next meeting and appreciate lots of feedback.
>
> Sent from my iPad
>
> > On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >
> > I think Kevin got it right.
> > How do you have time to do industry studies?
> > We have 10 members and 20 stocks and we can take up 2/3’s of our meetings with quarterly reports.
> > We do use Zoom periodically to do just an industry study outside of a meeting.
> > Plus I question how well someone is closely following 3-4 stocks apiece.
> > You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> > That would also improve your portfolio return.
> >
> > Bob
> >
> >> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>
> >> We have 13 members. We each watch 3-4 stocks and switch them periodically.
> >>
> >> Sent from my iPad
> >>
> >>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >>>
> >>> How many members does your club have?
> >>>
> >>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>>>
> >>>> Our club is struggling with balancing our portfolio. We have
> >>>> had great success over the past few years with 3 stocks
> >>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
> >>>> members want to sell some while others still see upside
> >>>> potential. We currently own 40 stocks and know that if we
> >>>> sell, we will invest the proceeds, but these stocks
> >>>> fundamentals are as strong as the stocks we are considering.
> >>>> So, my question is this: how often does your club rebalance
> >>>> and how do you determine what you are selling? Do you cap
> >>>> each stock at a certain % of your total portfolio? Thanks in
> >>>> advance!
> >>>
> >>
> >
The President of our STAR Investment Club created a table outlining the decision process for selling stocks. (It was derived from presentations on When to Sell by Gary Ball and other long-term respected BetterInvesting instructors.)
She puts it at the end of the Agenda every month.
It serves as a great reminder when we might get too emotional making -- or not making -- the Sell Decision.

Let's see if inserting it works...

Major Reasons to Sell

Other Reasons to Sell

Wrong Reasons to Sell

Wrong Reason to NOT Sell

You Need the Money

Stock no longer fits investment objective

Price Hasn't Moved

Emotionally attached to stock

A Mistake was Made

Dividend cut or eliminated

Price is down (find out why)

Hate to Admit a Mistake

The Stock has become Extremely Overvalued

To improve the quality of portfolio (use Challenge Tree)

Price is up

Hate to Take a Loss

Fundamentals of the Company have deteriorated since purchased

For Tax Loss

Temporary Bad News

Selling 'short'


Linda





On Thu, Feb 11, 2021 at 7:30 AM Bob Mann via bivio.com <user*12614800001@bivio.com> wrote:
My club has max own value and max and min buy values.

PV is current total portfolio value
NS is current number of stocks in our portfolio

- Minimum buy value is cash available at the time, up to 1/3 * (NS+1)*PV. We want the smallest position in our portfolio to be at least 1/3 *NS * PV and the first formula allows us to buy a new stock when we don't have enough money to meet our minimum.

- Maximum buy value is 5/4 * NS * PV. Once this value is reached we will no longer add to our position in this asset.

- Maximum own value is 2/NS * PV. If the current asset value exceeds this amount then we reduce our position, to a minimum of Maximum buy value. This allows us to re-balance our portfolio while continuing to let the winner run without crippling it.

- Sector limit. We also have an upper limit of 30% of PV for any one sector.

Other than that we never re-balance. We also limit the number of stocks we can own to 2 * number of partners. 15-20 stocks is more than enough to create a well-diversified portfolio.

These formulas (guidelines, and we do violate them from time to time) allow us to have meaningful positions in our holdings. Not so small that a 100% return is meaningless to overall value and not so large that a 10% drop devastates our portfolio value. And, not too much in any one sector so that when it corrects that also doesn't devastate our portfolio.

Bob Mann
Lunch Money Investment Club

> On 02/11/2021 8:11 AM Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>
>
> Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That's not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I've been tasked with bringing options to our next meeting and appreciate lots of feedback.
>
> Sent from my iPad
>
> > On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >
> > I think Kevin got it right.
> > How do you have time to do industry studies?
> > We have 10 members and 20 stocks and we can take up 2/3's of our meetings with quarterly reports.
> > We do use Zoom periodically to do just an industry study outside of a meeting.
> > Plus I question how well someone is closely following 3-4 stocks apiece.
> > You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> > That would also improve your portfolio return.
> >
> > Bob
> >
> >> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>
> >> We have 13 members. We each watch 3-4 stocks and switch them periodically.
> >>
> >> Sent from my iPad
> >>
> >>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >>>
> >>> How many members does your club have?
> >>>
> >>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>>>
> >>>> Our club is struggling with balancing our portfolio. We have
> >>>> had great success over the past few years with 3 stocks
> >>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
> >>>> members want to sell some while others still see upside
> >>>> potential. We currently own 40 stocks and know that if we
> >>>> sell, we will invest the proceeds, but these stocks
> >>>> fundamentals are as strong as the stocks we are considering.
> >>>> So, my question is this: how often does your club rebalance
> >>>> and how do you determine what you are selling? Do you cap
> >>>> each stock at a certain % of your total portfolio? Thanks in
> >>>> advance!
> >>>
> >>
> >

Thank You, Linda.

I like your idea and will put it into action.

Lynn

From: club_cafe@bivio.com <club_cafe@bivio.com> On Behalf Of Linda Glein via bivio.com
Sent: Thursday, February 11, 2021 8:58 AM
To: club_cafe@bivio.com
Subject: Re: [club_cafe] Balancing our portfolio

The President of our STAR Investment Club created a table outlining the decision process for selling stocks. (It was derived from presentations on When to Sell by Gary Ball and other long-term respected BetterInvesting instructors.)

She puts it at the end of the Agenda every month. 

It serves as a great reminder when we might get too emotional making -- or not making -- the Sell Decision.

Let's see if inserting it works...

Major Reasons to Sell

Other Reasons to Sell

Wrong Reasons to Sell

Wrong Reason to NOT Sell

You Need the Money

 

Stock no longer fits investment objective

Price Hasn't Moved

 

Emotionally attached to stock

A Mistake was Made

 

Dividend cut or eliminated

 

Price is down (find out why)

Hate to Admit a Mistake

 

The Stock has become Extremely Overvalued

 

To improve the quality of portfolio (use Challenge Tree)

Price is up

 

Hate to Take a Loss

 

Fundamentals of the Company have deteriorated since purchased

For Tax Loss

 

Temporary Bad News

Selling 'short'

 

Linda

On Thu, Feb 11, 2021 at 7:30 AM Bob Mann via bivio.com <user*12614800001@bivio.com> wrote:

My club has max own value and max and min buy values. 

PV is current total portfolio value
NS is current number of stocks in our portfolio

- Minimum buy value is cash available at the time, up to 1/3 * (NS+1)*PV. We want the smallest position in our portfolio to be at least 1/3 *NS * PV and the first formula allows us to buy a new stock when we don't have enough money to meet our minimum.

- Maximum buy value is 5/4 * NS * PV. Once this value is reached we will no longer add to our position in this asset.

- Maximum own value is 2/NS * PV.  If the current asset value exceeds this amount then we reduce our position, to a minimum of Maximum buy value.  This allows us to re-balance our portfolio while continuing to let the winner run without crippling it.

- Sector limit. We also have an upper limit of 30% of PV for any one sector.

Other than that we never re-balance.  We also limit the number of stocks we can own to 2 * number of partners.  15-20 stocks is more than enough to create a well-diversified portfolio.

These formulas (guidelines, and we do violate them from time to time) allow us to have meaningful positions in our holdings. Not so small that a 100% return is meaningless to overall value and not so large that a 10% drop devastates our portfolio value.  And, not too much in any one sector so that when it corrects that also doesn't devastate our portfolio.

Bob Mann
Lunch Money Investment Club

> On 02/11/2021 8:11 AM Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>

> Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That's not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I've been tasked with bringing options to our next meeting and appreciate lots of feedback.
>
> Sent from my iPad
>
> > On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >
> > I think Kevin got it right.
> > How do you have time to do industry studies?
> > We have 10 members and 20 stocks and we can take up 2/3's of our meetings with quarterly reports.
> > We do use Zoom periodically to do just an industry study outside of a meeting.
> > Plus I question how well someone is closely following 3-4 stocks apiece.
> > You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> > That would also improve your portfolio return.
> >
> > Bob
> >
> >> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>
> >> We have 13 members. We each watch 3-4 stocks and switch them periodically.
> >>
> >> Sent from my iPad
> >>
> >>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >>>
> >>> How many members does your club have?
> >>>
> >>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>>>
> >>>> Our club is struggling with balancing our portfolio. We have
> >>>> had great success over the past few years with 3 stocks
> >>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
> >>>> members want to sell some while others still see upside
> >>>> potential. We currently own 40 stocks and know that if we
> >>>> sell, we will invest the proceeds, but these stocks
> >>>> fundamentals are as strong as the stocks we are considering.
> >>>> So, my question is this: how often does your club rebalance
> >>>> and how do you determine what you are selling? Do you cap
> >>>> each stock at a certain % of your total portfolio? Thanks in
> >>>> advance!
> >>>
> >>
> >

Bob,

The logic or reasoning you mentioned at the bottom of your note makes perfect sense, such that I'd like to suggest our club adopt something similar, but I am not following your formulas:

If the club's portfolio value is $200K and the club currently owns 10 stocks (NS=10), that would mean minimum buy value is up to 1/3*(NS+1)*PV = $733.33K.  To buy $733.33K of an asset when your PV is $200K doesn't seem reasonable.  What am I missing or misinterpreting?  I get similar nonsensical answers with the other two formulas.  Can you plug in examples for the 3 formulas and provide a bit more context?

Thanks,
--Dan W.

On Thursday, February 11, 2021, 09:30:46 AM CST, Bob Mann via bivio.com <user*12614800001@bivio.com> wrote:


My club has max own value and max and min buy values. 

PV is current total portfolio value
NS is current number of stocks in our portfolio

- Minimum buy value is cash available at the time, up to 1/3 * (NS+1)*PV. We want the smallest position in our portfolio to be at least 1/3 *NS * PV and the first formula allows us to buy a new stock when we don't have enough money to meet our minimum.

- Maximum buy value is 5/4 * NS * PV. Once this value is reached we will no longer add to our position in this asset.

- Maximum own value is 2/NS * PV.  If the current asset value exceeds this amount then we reduce our position, to a minimum of Maximum buy value.  This allows us to re-balance our portfolio while continuing to let the winner run without crippling it.

- Sector limit. We also have an upper limit of 30% of PV for any one sector.

Other than that we never re-balance.  We also limit the number of stocks we can own to 2 * number of partners.  15-20 stocks is more than enough to create a well-diversified portfolio.

These formulas (guidelines, and we do violate them from time to time) allow us to have meaningful positions in our holdings. Not so small that a 100% return is meaningless to overall value and not so large that a 10% drop devastates our portfolio value.  And, not too much in any one sector so that when it corrects that also doesn't devastate our portfolio.

Bob Mann
Lunch Money Investment Club

> On 02/11/2021 8:11 AM Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
>

> Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That's not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I've been tasked with bringing options to our next meeting and appreciate lots of feedback.
>
> Sent from my iPad
>
> > On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >
> > I think Kevin got it right.
> > How do you have time to do industry studies?
> > We have 10 members and 20 stocks and we can take up 2/3's of our meetings with quarterly reports.
> > We do use Zoom periodically to do just an industry study outside of a meeting.
> > Plus I question how well someone is closely following 3-4 stocks apiece.
> > You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> > That would also improve your portfolio return.
> >
> > Bob
> >
> >> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>
> >> We have 13 members. We each watch 3-4 stocks and switch them periodically.
> >>
> >> Sent from my iPad
> >>
> >>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user*27509400001@bivio.com> wrote:
> >>>
> >>> How many members does your club have?
> >>>
> >>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user*4252200001@bivio.com> wrote:
> >>>>
> >>>> Our club is struggling with balancing our portfolio. We have
> >>>> had great success over the past few years with 3 stocks
> >>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
> >>>> members want to sell some while others still see upside
> >>>> potential. We currently own 40 stocks and know that if we
> >>>> sell, we will invest the proceeds, but these stocks
> >>>> fundamentals are as strong as the stocks we are considering.
> >>>> So, my question is this: how often does your club rebalance
> >>>> and how do you determine what you are selling? Do you cap
> >>>> each stock at a certain % of your total portfolio? Thanks in
> >>>> advance!
> >>>
> >>
> >
Dan,
I typed too fast and put the left '(' in the wrong spot!  sorry.  It should have been:
1 / (3 * (NS+1)) * PV
 
Your example of NS being 10 and PV 200,000
then 1 / (3 * 11)) * 200000 is 1 / 33 * 200000, which is 6060.61
 
Max buy is 5 / (4 * NS) * PV
Same example numbers gives 5 / 40 * 200000, or 25000
 
Max own is 2 / NS * PV
same example numbers gives 2 / 10 * 200000, or 40000
 
Bob
On 02/14/2021 6:23 PM Daniel Williams via bivio.com <user*33673100001@bivio.com> wrote:
 
 
 
Bob,
 
The logic or reasoning you mentioned at the bottom of your note makes perfect sense, such that I'd like to suggest our club adopt something similar, but I am not following your formulas:
 
If the club's portfolio value is $200K and the club currently owns 10 stocks (NS=10), that would mean minimum buy value is up to 1/3*(NS+1)*PV = $733.33K.  To buy $733.33K of an asset when your PV is $200K doesn't seem reasonable.  What am I missing or misinterpreting?  I get similar nonsensical answers with the other two formulas.  Can you plug in examples for the 3 formulas and provide a bit more context?
 
Thanks,
--Dan W.
 
On Thursday, February 11, 2021, 09:30:46 AM CST, Bob Mann via bivio.com <user*12614800001@bivio.com> wrote:
 
 
My club has max own value and max and min buy values. 

PV is current total portfolio value
NS is current number of stocks in our portfolio

- Minimum buy value is cash available at the time, up to 1/3 * (NS+1)*PV. We want the smallest position in our portfolio to be at least 1/3 *NS * PV and the first formula allows us to buy a new stock when we don't have enough money to meet our minimum.

- Maximum buy value is 5/4 * NS * PV. Once this value is reached we will no longer add to our position in this asset.

- Maximum own value is 2/NS * PV.  If the current asset value exceeds this amount then we reduce our position, to a minimum of Maximum buy value.  This allows us to re-balance our portfolio while continuing to let the winner run without crippling it.

- Sector limit. We also have an upper limit of 30% of PV for any one sector.

Other than that we never re-balance.  We also limit the number of stocks we can own to 2 * number of partners.  15-20 stocks is more than enough to create a well-diversified portfolio.

These formulas (guidelines, and we do violate them from time to time) allow us to have meaningful positions in our holdings. Not so small that a 100% return is meaningless to overall value and not so large that a 10% drop devastates our portfolio value.  And, not too much in any one sector so that when it corrects that also doesn't devastate our portfolio.

Bob Mann
Lunch Money Investment Club

> On 02/11/2021 8:11 AM Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
>

> Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That's not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I've been tasked with bringing options to our next meeting and appreciate lots of feedback.
>
> Sent from my iPad
>
> > On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user* 27509400001@bivio.com> wrote:
> >
> > I think Kevin got it right.
> > How do you have time to do industry studies?
> > We have 10 members and 20 stocks and we can take up 2/3's of our meetings with quarterly reports.
> > We do use Zoom periodically to do just an industry study outside of a meeting.
> > Plus I question how well someone is closely following 3-4 stocks apiece.
> > You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> > That would also improve your portfolio return.
> >
> > Bob
> >
> >> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
> >>
> >> We have 13 members. We each watch 3-4 stocks and switch them periodically.
> >>
> >> Sent from my iPad
> >>
> >>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user* 27509400001@bivio.com> wrote:
> >>>
> >>> How many members does your club have?
> >>>
> >>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
> >>>>
> >>>> Our club is struggling with balancing our portfolio. We have
> >>>> had great success over the past few years with 3 stocks
> >>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
> >>>> members want to sell some while others still see upside
> >>>> potential. We currently own 40 stocks and know that if we
> >>>> sell, we will invest the proceeds, but these stocks
> >>>> fundamentals are as strong as the stocks we are considering.
> >>>> So, my question is this: how often does your club rebalance
> >>>> and how do you determine what you are selling? Do you cap
> >>>> each stock at a certain % of your total portfolio? Thanks in
> >>>> advance!
> >>>
> >>
> >
Got it, thank you so much!

On Sunday, February 14, 2021, 06:22:38 PM CST, Bob Mann via bivio.com <user*12614800001@bivio.com> wrote:


Dan,
I typed too fast and put the left '(' in the wrong spot!  sorry.  It should have been:
1 / (3 * (NS+1)) * PV
 
Your example of NS being 10 and PV 200,000
then 1 / (3 * 11)) * 200000 is 1 / 33 * 200000, which is 6060.61
 
Max buy is 5 / (4 * NS) * PV
Same example numbers gives 5 / 40 * 200000, or 25000
 
Max own is 2 / NS * PV
same example numbers gives 2 / 10 * 200000, or 40000
 
Bob
On 02/14/2021 6:23 PM Daniel Williams via bivio.com <user*33673100001@bivio.com> wrote:
 
 
 
Bob,
 
The logic or reasoning you mentioned at the bottom of your note makes perfect sense, such that I'd like to suggest our club adopt something similar, but I am not following your formulas:
 
If the club's portfolio value is $200K and the club currently owns 10 stocks (NS=10), that would mean minimum buy value is up to 1/3*(NS+1)*PV = $733.33K.  To buy $733.33K of an asset when your PV is $200K doesn't seem reasonable.  What am I missing or misinterpreting?  I get similar nonsensical answers with the other two formulas.  Can you plug in examples for the 3 formulas and provide a bit more context?
 
Thanks,
--Dan W.
 
On Thursday, February 11, 2021, 09:30:46 AM CST, Bob Mann via bivio.com <user*12614800001@bivio.com> wrote:
 
 
My club has max own value and max and min buy values. 

PV is current total portfolio value
NS is current number of stocks in our portfolio

- Minimum buy value is cash available at the time, up to 1/3 * (NS+1)*PV. We want the smallest position in our portfolio to be at least 1/3 *NS * PV and the first formula allows us to buy a new stock when we don't have enough money to meet our minimum.

- Maximum buy value is 5/4 * NS * PV. Once this value is reached we will no longer add to our position in this asset.

- Maximum own value is 2/NS * PV.  If the current asset value exceeds this amount then we reduce our position, to a minimum of Maximum buy value.  This allows us to re-balance our portfolio while continuing to let the winner run without crippling it.

- Sector limit. We also have an upper limit of 30% of PV for any one sector.

Other than that we never re-balance.  We also limit the number of stocks we can own to 2 * number of partners.  15-20 stocks is more than enough to create a well-diversified portfolio.

These formulas (guidelines, and we do violate them from time to time) allow us to have meaningful positions in our holdings. Not so small that a 100% return is meaningless to overall value and not so large that a 10% drop devastates our portfolio value.  And, not too much in any one sector so that when it corrects that also doesn't devastate our portfolio.

Bob Mann
Lunch Money Investment Club

> On 02/11/2021 8:11 AM Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
>

> Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That's not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I've been tasked with bringing options to our next meeting and appreciate lots of feedback.
>
> Sent from my iPad
>
> > On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user* 27509400001@bivio.com> wrote:
> >
> > I think Kevin got it right.
> > How do you have time to do industry studies?
> > We have 10 members and 20 stocks and we can take up 2/3's of our meetings with quarterly reports.
> > We do use Zoom periodically to do just an industry study outside of a meeting.
> > Plus I question how well someone is closely following 3-4 stocks apiece.
> > You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> > That would also improve your portfolio return.
> >
> > Bob
> >
> >> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
> >>
> >> We have 13 members. We each watch 3-4 stocks and switch them periodically.
> >>
> >> Sent from my iPad
> >>
> >>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user* 27509400001@bivio.com> wrote:
> >>>
> >>> How many members does your club have?
> >>>
> >>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
> >>>>
> >>>> Our club is struggling with balancing our portfolio. We have
> >>>> had great success over the past few years with 3 stocks
> >>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
> >>>> members want to sell some while others still see upside
> >>>> potential. We currently own 40 stocks and know that if we
> >>>> sell, we will invest the proceeds, but these stocks
> >>>> fundamentals are as strong as the stocks we are considering.
> >>>> So, my question is this: how often does your club rebalance
> >>>> and how do you determine what you are selling? Do you cap
> >>>> each stock at a certain % of your total portfolio? Thanks in
> >>>> advance!
> >>>
> >>
> >

Thanks Bob. We were having a similar conversation around holding limits in our club and this will be very helpful. Appreciate you sharing this.

Jimmy Dickerson

TLP Investment Club

From: club_cafe@bivio.com <club_cafe@bivio.com> On Behalf Of Bob Mann via bivio.com
Sent: Sunday, February 14, 2021 7:22 PM
To: club_cafe@bivio.com
Subject: Re: [club_cafe] Balancing our portfolio

Dan,

I typed too fast and put the left '(' in the wrong spot!  sorry.  It should have been:

1 / (3 * (NS+1)) * PV

 

Your example of NS being 10 and PV 200,000

then 1 / (3 * 11)) * 200000 is 1 / 33 * 200000, which is 6060.61

 

Max buy is 5 / (4 * NS) * PV

Same example numbers gives 5 / 40 * 200000, or 25000

 

Max own is 2 / NS * PV

same example numbers gives 2 / 10 * 200000, or 40000

 

Bob

On 02/14/2021 6:23 PM Daniel Williams via bivio.com <user*33673100001@bivio.com> wrote:

 

 

 

Bob,

 

The logic or reasoning you mentioned at the bottom of your note makes perfect sense, such that I'd like to suggest our club adopt something similar, but I am not following your formulas:

 

If the club's portfolio value is $200K and the club currently owns 10 stocks (NS=10), that would mean minimum buy value is up to 1/3*(NS+1)*PV = $733.33K.  To buy $733.33K of an asset when your PV is $200K doesn't seem reasonable.  What am I missing or misinterpreting?  I get similar nonsensical answers with the other two formulas.  Can you plug in examples for the 3 formulas and provide a bit more context?

 

Thanks,

--Dan W.

 

On Thursday, February 11, 2021, 09:30:46 AM CST, Bob Mann via bivio.com <user*12614800001@bivio.com> wrote:

 

 

My club has max own value and max and min buy values. 

PV is current total portfolio value
NS is current number of stocks in our portfolio

- Minimum buy value is cash available at the time, up to 1/3 * (NS+1)*PV. We want the smallest position in our portfolio to be at least 1/3 *NS * PV and the first formula allows us to buy a new stock when we don't have enough money to meet our minimum.

- Maximum buy value is 5/4 * NS * PV. Once this value is reached we will no longer add to our position in this asset.

- Maximum own value is 2/NS * PV.  If the current asset value exceeds this amount then we reduce our position, to a minimum of Maximum buy value.  This allows us to re-balance our portfolio while continuing to let the winner run without crippling it.

- Sector limit. We also have an upper limit of 30% of PV for any one sector.

Other than that we never re-balance.  We also limit the number of stocks we can own to 2 * number of partners.  15-20 stocks is more than enough to create a well-diversified portfolio.

These formulas (guidelines, and we do violate them from time to time) allow us to have meaningful positions in our holdings. Not so small that a 100% return is meaningless to overall value and not so large that a 10% drop devastates our portfolio value.  And, not too much in any one sector so that when it corrects that also doesn't devastate our portfolio.

Bob Mann
Lunch Money Investment Club


> On 02/11/2021 8:11 AM Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
>

> Each of our members is responsible for 3-4 stocks. We are all doing a good job with our reports and do not discuss every stock at every meeting. We also have a text and email thread for urgent issues between our monthly meetings. That's not the issue we are having. Here is the issue: our total portfolio value is $440,000. Three stocks are currently $78,000, $49,000 & $41,000. Combined, they are 1/3 of our portfolio. We all agree that we still see growth in these stocks, but some members feel we should take some profit. We have discussed re-balancing and not allowing a stock to constitute more than 10 or 15% of our holdings. Do most clubs rebalance? If so, how often and is there a formula your club uses? Thank you Kevin for letting me know how your club does this. I've been tasked with bringing options to our next meeting and appreciate lots of feedback.
>
> Sent from my iPad
>
> > On Feb 11, 2021, at 6:27 AM, Robert Shaw via bivio.com <user* 27509400001@bivio.com> wrote:
> >
> > I think Kevin got it right.
> > How do you have time to do industry studies?
> > We have 10 members and 20 stocks and we can take up 2/3's of our meetings with quarterly reports.
> > We do use Zoom periodically to do just an industry study outside of a meeting.
> > Plus I question how well someone is closely following 3-4 stocks apiece.
> > You may want to rank your portfolio by PAR and start to cull the ones at the bottom.
> > That would also improve your portfolio return.
> >
> > Bob
> >
> >> On Feb 10, 2021, at 9:24 PM, Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
> >>
> >> We have 13 members. We each watch 3-4 stocks and switch them periodically.
> >>
> >> Sent from my iPad
> >>
> >>>> On Feb 10, 2021, at 8:48 PM, Robert Shaw via bivio.com <user* 27509400001@bivio.com> wrote:
> >>>
> >>> How many members does your club have?
> >>>
> >>>> On Feb 10, 2021, at 8:41 PM, Judy Knelly via bivio.com <user* 4252200001@bivio.com> wrote:
> >>>>
> >>>> Our club is struggling with balancing our portfolio. We have
> >>>> had great success over the past few years with 3 stocks
> >>>> which are now 16.8, 10.7 and 9% of our portfolio. Some
> >>>> members want to sell some while others still see upside
> >>>> potential. We currently own 40 stocks and know that if we
> >>>> sell, we will invest the proceeds, but these stocks
> >>>> fundamentals are as strong as the stocks we are considering.
> >>>> So, my question is this: how often does your club rebalance
> >>>> and how do you determine what you are selling? Do you cap
> >>>> each stock at a certain % of your total portfolio? Thanks in
> >>>> advance!
> >>>
> >>
> >