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Saturday, 17 August 2013

Portfolio rebalance and capital preservation

In recent weeks I have seen a number of passive income investors (PII) selling stocks at realized losses. 

For PII, in their stock portfolio are not speculative stocks; in in their portfolio are reasonably well and good dividend stocks.  PII should not be too distracted by movement of stock prices - ups and downs. 

If PII needs to re-balance her (/his) stock portfolio then when is the best time to do so?   Is doing portfolio re-balancing during shares prices going through correction is a good move?  Especially when divesting it away at realized loss!  A better time to do portfolio re-balancing is when the stocks in the portfolio are having paper gain status; during market bull run. 

Is it a good move to preserve capital or building up war chest for investing during a bear market?  By divesting stock at realized loss then is this still an act of capital preservation when in the first place PII should actually do nothing and enjoying the dividends paid quarterly or semi-annually? By locking up (realized) profit when stock market prices are up then PII can preserve capital and building up war chest. 

 

1 comment:

  1. Well said ! Portfolio balancing should be done at position of strength.

    ReplyDelete

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