Core Holdings and Portfolio Management

Core Holdings and Portfolio Management

Okay, it’s the spring of 2015 and you can see the stock market has far more risk in it than reward. You hold say 20 stocks. You have the bulk of your money invested in some solid dividend growth stocks. These are your core holdings. The types of stocks you want to hold on to. Why? Yield on cost! Remember the post awhile ago about dividend growth investing. These stocks are providing you with a growing stream of income that should only increase in the years ahead. Your core holdings have a tendency to be larger in market cap (but in my case, not too large) more established in their markets, and are the cornerstones on which your whole investment portfolio rests. They are like old familiar friends. You know in the long term you can count on them on being there.

This leaves everything else. You may want to lighten up on some positions or sell others outright before the market deteriorates further. Try to focus on the stocks in your portfolio that don’t pay a dividend. If you’re right about the risk in the current market place, you might be able to buy some of them back at more attractive prices. I know this sound’s like market timing but I urge you not to think of it that way. Focus on the risk that presently exists in the market and act accordingly. Maybe sell or pare back on your non dividend paying stocks that are over extended (way above their long term moving averages).

This is more of an art form than anything else and once you gain some experience in the market the process will become clearer to you. My advice is not to rush (like I do sometimes) and take your time and enjoy the journey because that is what it is.

One more thing. This selling or lightening up on positions to manage your risk is strategic and long term in nature. Most of the time investing involves just sitting tall in the saddle while you mosey on through town. If you cut down on the number of decisions you make you will find yourself making less mistakes and going through less stress in the process and that can only be a good thing.