I’m trying to transition my portfolios from very diversified to concentrated portfolios. I have three portfolios:
- Dividend stocks (generating stable cash flow).
- Value and special situation focused.
- Some funds (offering diversity or allowing me macro investments in markets/industries I have not much knowledge/understanding).
My portfolios consist around 100 positions which is way too many in my opinion. It is very time consuming and as a result doesn’t allow me to follow each company closely. You might wonder how I ended up with so many positions in my portfolio.
- I just started accumulating and by nature I’m a collector. Yes, I’m really enjoying collecting things.
- Often I would find an interesting company/investment thesis and I just initiate a starting position. Skin in the game helps me to invest more time and energy to learn more about the company. Often it would happen that the share price goes up much faster than expected not allowing me to buy more shares – nothing to complain about this.
- Another situation I find myself often is that an investment did so well over the years that I “fell in love” with the company and missed to sell them near their peak or I keep the profits invested just to keep following the business and not to miss the opportunity of a x-bagger. There is nothing wrong about holding a winner but getting emotional attached influences decision making which can become costly – especially when the business is cyclical. (For example I considered Eckert and Ziegler overvalued by 120 but kept some shares to stay in the game…now their share price reached 60 and I could buy them back much cheaper.)
- Spin-offs. Some companies I’m holding decide to spin off part of their business and the position is often too small to sell, for tax reasons it makes more sense to just hold them and historically it is proven that spin offs suffer often short term as many shareholders dump them but then outperform. I have no solution for this problem. Any suggestions?
- Last but not least I have a few legacy positions which performed poorly, especially when I started my investment journey back in the days. I’m keeping them as a reminder – a warning on what happens when risks are being overlooked or ignored. Nowadays I avoid risky investments or try to sell looser before they can become even bigger looser.
So, coming back to the goal. I’m trying to reduce my dividend portfolio to max 20 positions, the same with my value portfolio and my fund portfolio to max 5-10 positions. This means I have to close around 50 positions. Deducting my legacy and spin-off holdings I have to close maybe 30-40 positions. Wow…that sounds a lot and after that I will be still very diversified. Let’s see how I get there. My recent sale of TAG was already a start. How do you keep your portfolio focused or do you prefer a very diversified portfolio?
2 thoughts on “Portfolio Goal for this year”
If the stocks are not correlated, diversification is often reach with 11-13 positions. I try to maintain the number of direct investments within that range with a max of 15. I also hold a couple of funds/ETFs but I do not actively manage those investments.
Thanks Ringo. 15 would be the ultimate goal but I lack confidence to aim this yet. Hopefully in a few years I will be there.