Sell 33% Of Your Portfolio - A Step-By-Step Method by The Dividend Guy

in steemleo •  7 days ago 

Source: YCharts/Dividend Stocks Rock results

Summary

  1. While I don't give financial advice, I built a canvas to help investors selling some of their stocks without hurting the overall portfolio performance going forward.
  2. I think the most rational way to sell stocks would be to rank all my holdings.
  3. Lower ranked stocks are likely to have underperformed in the past couple of years. If I get rid of them, my top picks would weight even more in my portfolio.
  4. After selling weak positions and cashing part of the profit on my best ones, the last thing I must look at is my sector allocation.
  5. This idea was discussed in more depth with members of my private investing community,Dividend Growth Rocks.

Selling stocks is a common topic discussed among investors. Sell because the company cuts its dividend. Sell because the market is about to crash (definitely my favorite reason). Sell because the stock is overvalued, etc. Those examples discuss more the timing to sell a position to eventually use the proceeds and invest again. But what happens when you need to sell stocks to finance a project? One day or another, you will have to sell stocks to finance your retirement, buy a rental property, pay for healthcare or simply buy yourself a treat. After all, you save and invest this money during decades, it's not to all leave it to your heirs, right?

A few weeks ago, a DSR member came to me with a very interesting question.

"Mike, I have a project and I need to liquidate 33% of my portfolio in the upcoming weeks. I am so focused on a buy and hold strategy and bulk selling is so seldom, I lack experience and would like some guidance."

In other words: How do I sell stocks, cash my money, not invest again and minimize the impact on the rest of my portfolio going forward?

While I don't give financial advice, I built a canvas to help investors selling some of their stocks without hurting the overall portfolio performance going forward. After all, you can't just sell the top 5 positions in alphabetical order to generate cash flow. You need a plan. Here's how I would do it.

#1 Rank My Stock - Get rid of the weak ones

Since investing is tied to my emotions (especially when I'm about to kiss goodbye some of my positions), I think the most rational way to sell stocks would be to rank all my holdings. I could use external ranking or my own. The number doesn't really matter either. I could simply rank my stocks from my favorite company down to the least interesting one in my portfolio. I could also rank each company individually based on an arbitrary scale of 5 or 10.

The idea is to find a way to identify your top stocks (the one you rather die and give them to your heirs before selling) and the "no so god" stocks where you are unsure if they will perform in the future or not. I've highlighted criterion you can use to create your own ranking here and there. Once you can separate a few weaker companies, you are already on your way to make your first sales. Think of it as a "portfolio detox" where you get rid of the fat and keep your best abs for summer!

How I would do it:

... read the full post on The Dividend Guy's Blog on Seeking Alpha

Author Bio:

This article was written by The Dividend Guy. A well-known investment author on Seeking Alpha.

Steem Account: @thedividendguy
Twitter: thedividendguy

Profile on Seeking Alpha

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Nice ! need to try.
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