A month ago I reallocated some PONDX profits and took a position in PETDX. I bought this fund due to its consistent long term performance and momentum since 2009. Here the two are charted over the last 4.5 years:
Over the last month PETDX has gained almost 10 %. Regardless of timeframe I try to discipline myself to take 10% gains from funds I own. For me, selling actualizes those gains. It forces me to have performance goals rather than timeframe goals. It forces me to have a game plan in place for where these profits go. It force me to have an overall long term investing strategy.
In the past, I have actualized gains and added to :
- cash,
- non-correlated funds (sell equities...buy bonds),
- uderperforming funds I hold long term (sell over performers...buy underperformers),
- my shifting need for income generating investments,
- a new position in a new asset class that hopefully further diversifies my overall portfolio.
You may have your own method of reallocating profits...sharing of any strategies would be appreciated.
Comments
Bee, you were right on your assessment of PONDX and I joined the band-wagon. Good choice. I may stick my toe in the water on PETDX too at some point, but I don't want to add equities now without taking another equity fund off the table. So I'll wait.
I hold CSRSX for REIT exposure now. Percentage is not very much now, but I intend to up my REIT exposure a bit down the road. Real estate, health-care/biotech and energy are my sector bets going forward.
As for diversifying to non-correlated assets, this is far and away the biggest challenge for investors. "All boats rise with the tide." But when the tide goes out......
If you are ok with lower but very smooth returns, the vehicles I prefer are MASNX, OSTIX (becoming very popular), SDGIX, PUBDX or MWCRX, and my "safety" fund RPHYX. I've been sleeping well on these.
When I dabble like Bee, I get burned more often than not. Not everybody is content with single-digit annual returns, but I like a smooth, boring ride.
A few key differences. I take more than a 10% haircut, I take 20%. My portfolio metrics make this rather easy as I set an arbitrary ceiling...$50K in my case...and I trim to 40. I knowingly violate the rule of "let your winners run", but this is a good forced rebalancing ritual and that 20% window allows for some runup.
I do violate this rule in the case of my individual stocks, as I focus on divi payors and am letting the shares pile up until retirement.
This metric also allows for parsing the "trimmings" into my current targets....SUBFX and OSTIX, currently both with transaction fees at Schwab. I don't mind the fees, as long as I plow sufficient dollars into the transaction. And MAINX (NTF). I tend not to take equity fund profits into other equity funds, but have recently violated that as I am filling out a position on YAFFX.
Generally, the profits are used for filling in around the edges...and PEDTX looks like a good candidate....thanks.
Mona