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When finding a sector that has lagged for a year or longer & one was to take a position (s) in them , at what % would you sell ? Taking the whole position or just the gain off the table ? It seems I delay in taking the profit & or gain. Does anyone care to chime in as to what they would do ?
Neither the whole position nor "just the gain." I'd probably dollar average out, maybe a third at a time over several months or longer. Of course, once you have taken out your initial investment, the remaining amount still invested becomes "the house's" money which is a very nice position to be in.
I think its a difficult question to answer because, in my case, the exit strategy would be based on the underlying beliefs that lead to the investment in the first place. If its only poor relative performance for some period of time, then my exit strategy would be based on achieving superior relative performance and normally I would exit a portion at a time based on what I believed the ultimate potential was. So for instance, if I achieved 60% of the objective I might take some or all of the profits.
Even if it achieved what I thought the potential was, I'd still keep 25-40% of my position in case that sector overshoots what I think is reasonable. And I would always have a stop loss in mind or in place, because if I'm wrong I wouldn't want to lose too much. Especially after achieving what I thought the full potential was, I'd be less and less willing to accept downside before closing the position.
I follow the sectors listed by Morningstar through the link below.
I use both the 30 & 90 day rolling return numbers to spot trends and, at times, overweight certain sectors through either choosing funds that are heavy in these favored sectors or by choosing sector funds themselves and overweighting through their use.
When the sectors have lost the top three positions then I’ll reduce these holdings if held for overweight purposes and then overweight the new performing sectors should I feel it is warranted based upon review of my current weightings.
From review, currently the three best performing sectors for the past ninety days according to this link are Health Care, Real Estate and Consumer Staple. These are three of the five sectors I am most always overweight based upon the design and makeup of my portfolio. Currently, my portfolio is overweight all the three main defensive sectors of utilities, staples and health care plus telecom and real estate. These five sectors make up better than forty percent of my equity sector allocation as compared to a normal weighting of about thirty two percent for these same sectors.
When other sectors such as materials, cyclical, financials, energy, industrials and technology start to gain momentum in the ninety day area and occupy one of the top three spots then I’ll start to increase my weighting in these sectors through either buying more by reducing cash or selling something off in the equity area and reallocating and/or some combination of both.
I have found it is best to know what I own and to determine this I use M*'s Instant Xray on a monthly basis to review my portfolio. If adjustments are found to be desired it can easily be done by adjusting the selection, number and amount of funds held within my portfolio through adjustments within certain investment sleeves of the portfolio.
"It seems I delay in taking the profit & or gain. Does anyone care to chime in as to what they would do ?" Derf
On all my profitable holdings(losers are a different question) I set a STOP PROFIT figure: For example: if I want/need 8% yr from my investments, and I am up 30-40% after 3yrs, I set a figure of 25% profit as a SELL figure, then if the investment goes down I have a good sale, If the investment goes up later, I don't care, I got my 8% a yr., that's what I wanted it the first place...easy peasy GREAT for current market as we all have Good/great gains for the last few years, WHY give them back? Take your 8% yr (or whatever) and run with what you have or wanted to make...tb
In the small percentage of my portfolio that I play with, I've adopted the Junkster method. Ride your winner until it's not. Basically you set a sell percentage from recent high. If you decide you will only except a 3% drop in return, consistently adjust the 3% sell point to follow the rising trend.
And, you buy what is already rising, not falling. The tighter the channel, the tighter you can make the sell %. Anyway, I've been doing it for a little while with, like Junkster, HY municipal bonds.
Comments
Even if it achieved what I thought the potential was, I'd still keep 25-40% of my position in case that sector overshoots what I think is reasonable. And I would always have a stop loss in mind or in place, because if I'm wrong I wouldn't want to lose too much. Especially after achieving what I thought the full potential was, I'd be less and less willing to accept downside before closing the position.
I follow the sectors listed by Morningstar through the link below.
I use both the 30 & 90 day rolling return numbers to spot trends and, at times, overweight certain sectors through either choosing funds that are heavy in these favored sectors or by choosing sector funds themselves and overweighting through their use.
When the sectors have lost the top three positions then I’ll reduce these holdings if held for overweight purposes and then overweight the new performing sectors should I feel it is warranted based upon review of my current weightings.
http://news.morningstar.com/fund-category-returns/
From review, currently the three best performing sectors for the past ninety days according to this link are Health Care, Real Estate and Consumer Staple. These are three of the five sectors I am most always overweight based upon the design and makeup of my portfolio. Currently, my portfolio is overweight all the three main defensive sectors of utilities, staples and health care plus telecom and real estate. These five sectors make up better than forty percent of my equity sector allocation as compared to a normal weighting of about thirty two percent for these same sectors.
When other sectors such as materials, cyclical, financials, energy, industrials and technology start to gain momentum in the ninety day area and occupy one of the top three spots then I’ll start to increase my weighting in these sectors through either buying more by reducing cash or selling something off in the equity area and reallocating and/or some combination of both.
I have found it is best to know what I own and to determine this I use M*'s Instant Xray on a monthly basis to review my portfolio. If adjustments are found to be desired it can easily be done by adjusting the selection, number and amount of funds held within my portfolio through adjustments within certain investment sleeves of the portfolio.
I hope this helps …
I wish all … “Good Investing.”
Old_Skeet
On all my profitable holdings(losers are a different question) I set a STOP PROFIT figure:
For example: if I want/need 8% yr from my investments, and I am up 30-40% after 3yrs, I set a figure of 25% profit as a SELL figure, then if the investment goes down I have a good sale, If the investment goes up later, I don't care, I got my 8% a yr., that's what I wanted it the first place...easy peasy
GREAT for current market as we all have Good/great gains for the last few years, WHY give them back? Take your 8% yr (or whatever) and run with what you have or wanted to make...tb
And, you buy what is already rising, not falling. The tighter the channel, the tighter you can make the sell %. Anyway, I've been doing it for a little while with, like Junkster, HY municipal bonds.
Have a good day,
Derf