Portfolio management

I think I would say most people or bloggers are great stock pickers with analysis of stocks pretty much covered.

However, no one has thought through or reviewed portfolio management in terms of weightage, when to sell/buy, how to lock in profits etc.

Any thoughts?

some like 3FS go in heavy less than 10 stocks, some buy 60 stocks.

I have my own theory, and trying to practice, but its pretty difficult lol.
I intend to have the portfolio weightage = best estimate current dividend yield (manual forecast) +/- 0.75%. Eg SGX full year dividend is now 30 cents, and is about 3.74% yield at current price of 8.01. I would try to keep it at about 3.2 to 4.2% of my portfolio.

My long term view is to have rebalancing once the gap is at a threshold of maybe 3.5%??
My two overweighted stocks are now AA reit and DBS, and I am studying opportunities to rebalance and reduce their weight where possible (preferably by pushing up some of the underweighted stocks).

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Yes, I am also trying to figure out. For example, if a stock you bought is making 25% profit, and you are no longer sure if it’ll continue to perform as well (opportunity cost). What are thought process that goes into it?

  1. Can you make more money (yield) putting the money somewhere else?
  2. Should we sell half to lock in the profit to prevent downside? “

What if the stocks is down 25%?

  1. should we continue to hold on to a losing stocks?
  2. or should we accept the loss and move on?

The problem I am facing is mostly the logical step of thinking about portfolio management. We all know stock picking have a few steps like 1) PE ratio, 2) EPS/yield, 3) volume of stocks, 4) market cap, 5) volatility e.g but seldom people have an idea on portfolio management. I used to work in an asset management firm and the chief investment officer only focused fully on balancing his portfolio whereas all the equity analysts are busy picking stocks. I guess that’s what make him the CIO.

So to your question, that’s why I come up with my theory to match the portfolio weight to the counter’s expected dividend yield. It gives me a quick way to identify what might be unrealistically priced, then starts my process to think how much I want to invest or divest of the counter. My rule of thumb is if I dont have a good idea how to do the math, but I decided on the direction, then just do 1/3 - ie buy 1/3 or sell 1/3 if no better math.

As for whether to buy or sell stocks, I run my weekly screening criteria using sgx, then see if the counter remains on my screenlist. If it doesn’t, and I am quite free, I expand the criteria and read some of its updates to get more info on why its not meeting my criteria. If it repeatedly fails, and I cant justify if the market is being plain stupid, I just sell.

I do the homework then go through my thought process if its just better to let it go. The loss is the secondary part because mr market can be quite wrong quite often.

I used to do this top 18 rule. Only 18 counters, to buy one (and already have 18 counters), then I need to sell one. It was a good process kinda of like playing survivor and deciding who was the lesser evil. But I obviously let loose a bit recently and up to 23 counters. I have in my mind who the top 10 might be, but really have tough time deciding on the next few. So I guess I would be playing Survivor with them soon again.

And it kinda depends what type of investor you are. I am more a dividend investor, and count on the dividends to help pay the mortage or be my replacement income when I retire. So I look at dividend yield quite a lot.

To me the price is an illusion. The real question is whether the dividend yield is a bargain. When sgx dividend yield was 4.3% (around 7.3), I considered it a good deal. But at 8 now, with a yield of 3.7%, I think I can find better deals for the risk, so I sold a bit.

And back to your investing preferences, set your own criteria. It helps give a focus and sometimes the thought process and your own goals will help you find the answer.

I have been clear for my dividend investing nature, so it was really whether the counter could stand the test of time in delivering dividends. My strictest set of criteria was 7% net profit margin, 7% roe, lower than 95% d/e, above 4.3% dividend yield, mkt cap above 1B, and 1 yr revenue change better than -3.5%. Those that met this criteria go thru the 2nd round, and I decide whether to give them a position after the homework. Those that repeatedly fail 2 or 3 criteria just end up on the list to be voted out until they prove themselves worthy.


Very very in-depth and thanks.

Let me digest and come back with my thinking. I like the way you think about your investing intent and treat all the stocks like a gaming item and when to sell if they are not part of the strategy.

My investment outcome is very much the same except that I am looking at a 2 million investible asset by 36-38 (max 40year old) which is about 7 years from now. I exclude my hdb housing (1st house) and my cpf. It’ll be purely cash, equities and bonds. By then, I’ll hold for 5% yield per year and retire with my wife.

Of cos, unless I find something passionate about to do. My saving rate is quite high at about 100k per annum. So I hope to achieve it sooner rather than later m.

I really like that @takingstock knows his/her investing intent and have a clear set of his own rules to follow.

For me, i have a set of growth and dividend stocks. For growth stocks, as long as the growth story remains intact, i will let them run and not sell just because the stock has run up and exceeds a certain portfolio percentage. Otherwise, you may missed out on potential ‘multi-baggers’ if you trim them too early for portfolio management. “Sell the losers and keep the winners” and not the other way round. Of course, if the growth story falls apart, then that will be the time to sell. Problem comes when you are not sure whether the growth story still remains intact. I will observe for quarter or 2. If still not sure, then perhaps can consider to sell some (takingstock 1/3 rule is a good one)

For dividend stocks, i debated abit on whether to trim, especially for REITs in this current environment. My hesitation comes from the fact that if i sell the really good and solid ones, i may not be able to buy back at a lower price with my original dividend yield. This is essentially trying to time the market. In the end, i concluded that for good dividend stocks with potential growth drivers to support further dividend growth in the future, I will keep them for (growing) dividends, especially if the yield on cost are already above 6%. Those with little forseeable growth drivers or with yields on cost lower than 6%, i may take the opportunity to sell.

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Hi I’m interested in this topic also, and recently I tried reading a few books like Active Portfolio Management https://www.amazon.com/Active-Portfolio-Management-Quantitative-Controlling/dp/0070248826 to understand more of the theory

Would like to discuss more of the theory with someone, please ping me if you have some thoughts or books to discuss

I’ve got Benjamin Graham’s book next on my reading list. But otherwise what I learnt so far in the past three years thru self experience:

  • monitoring the market multiple times per day is definitely not my style. Very distracting and gets on my nerve. Got sleepless nights over it coz its my money.

  • the most useful part learnt from books was time in the market is more important than timing the market. To be honest, I seldom caught a stock at its lowest point (maybe +/- 5%).

  • when you try to time the market, and balance too often, you incur a lot of fees buying and selling so often. That takes a toll on returns when you are doing nibbling at small amounts and the gain / loss won’t be a game changer. On the other hand if you are taking big bites, then its really praying you bite at the right time and it could really magnify the gain / loss. Really rollercoaster. I think I read somewhere every 0.1% increase in fees = 2% lower returns over a ten year period. I set my benchmark to keeping fees at below 1%.

  • there was a recent article CW quoted that frequent rebalancing produced low returns (see point above), and that we might be better off rebalancing like once a year.

  • One other book I read mentioned never to be fully vested, and never to be not vested. It recommended maybe maxing out cash / (cash + investments) at 1/3. But if you see Warren Buffet, he also never fully exit, or go fully vested. In fact he’s hoarding a lot of cash right now.

  • since then I started thinking and reading more about capital budgeting, and think setting a hurdle rate to optimize returns was probably the most cost efficient way, and been thinking of how to apply that.

  • my current method is setting aside 1/3 of my savings for DCA but only on one stock for cash and one for SRS. I further tune the DCA amount to increase if the underlying dividend yield is attractive, or lower / stop the DCA when it is less / not attractive.

  • For the other 2/3, I am keeping to earn the 3.2% interest in 360 account, and my hurdle rate is probably going to be 2.3x 3 month SIBOR.

Cross fingers that it works.

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I’m using kelly’s criterion for my portfolio sizing. You can google it. normally holding only 2-3 stocks. You could also view my previous posts from below to see how I did it. https://www.investingnote.com/users/vincentwong10#/?display=profile&user=vincentwong10&tab=latest