I said: "factoring portfolio diversification into buy decisions should take care of most rebalancing needs"
Lowell replied: "This is assuming one has fresh cash available for new purchases. This is less true for retired folks."
Hi Lowell. While I agree that it's "less true", that doesn't make it "untrue". <g>
I and at least some others that I know find that the sort of ideal of "hold forever" (was this Buffet or Philip Carret ... ?) --- that this isn't practical. I, for example, sold my shares in Cardinal Health earlier this year. I was prepared to hold it for a very long time, and had in fact held it for quite a while. But too many issues came up that made me question management and the ability of the company to reliably grow earnings going forward. The result was that I had, if not "fresh cash", nevertheless cash to redeploy in the market.
My assertion is that typically enough such events occur --- selling for either offensive or (as in this case) defensive reasons --- that one can normally maintain adequate diversification without selling just to maintain diversification.
The exceptions being somewhat extreme cases: The happy situation of a very big winner that you don't sell off too soon. Or the unhappy situation where your defensive selling doesn't happen soon enough --- so that you have what I think that you (Lowell) coined the term "shard stocks" for. Or maybe you heard the term elsewhere (I think I heard it from you, though of course the phenomenon is all too commonly known! <g>).
Brian Lewis
President, Puget Sound Chapter NAIC
Director, NIA Advisory Board
http://www.nwlink.com/~brianle/
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