LM portfolio as at 12/11/2021:
| Code | Sector | Date Bought | Cost | Value | Gain/Loss |
|---|---|---|---|---|---|
| LM026 LM026-2 LM026-3 |
ETF | 14/10/2020 09/12/2020 06/07/2021 |
£3430 | £3920 | 14.26% |
| LM028 LM028-2 |
'No specific industry' | 16/11/2020 10/08/2021 |
£2280 | £3100 | 35.92% |
| LM033 LM033-2 |
Health Care Equipment & Services | 04/01/2021 03/08/2021 |
£2320 | £2400 | 3.56% |
| LM034 | Food & Drug Retailers | 18/01/2021 | £1020 | £1230 | 20.72% |
| LM035 | Food Producers | 19/01/2021 | £1040 | £1110 | 6.19% |
| LM037 LM037-2 |
Life Insurance | 03/03/2021 05/07/2021 |
£2290 | £2600 | 13.64% |
| LM038 | Banks | 10/03/2021 | £1020 | £1160 | 13.40% |
| LM039 | Pharmaceuticals & Biotechnology | 30/03/2021 | £1030 | £1110 | 8.19% |
| LM040 | General Financial | 27/04/2021 | £1020 | £1330 | 29.71% |
| LM041 | Real Estate Investment Trusts | 27/07/2021 | £1270 | £1440 | 13.10% |
| LM042 | Construction & Materials | 27/07/2021 | £1270 | £1370 | 7.57% |
| LM043 | ETF | 27/09/2021 | £1260 | £1310 | 3.82% |
| LM044 | Support Services | 27/09/2021 | £1270 | £1190 | (5.99%) |
Browsing through a magazine sent to me by a broker, I was taken aback by a paragraph which suggested that it's a good idea to "rebalance" your portfolio.
Here's what it said:
"Rebalancing involves selling investments that have performed well to buy other investments that have performed poorly."
Obviously I can't speak for everyone but to me this sounds like a great way to cut short investment gains and maybe even lose money.
If a share is doing well i.e. going up in value then why on earth would I want to randomly sell it and use the proceeds to buy a share which is not doing well i.e. going down in value?
I did a little searching on the world wide web (it's what we used to call the internet back in the '90s) and found that this type of rebalancing really is a thing.
Admittedly I didn't read too much into it but Fool.com confirmed that you can "rebalance" a portfolio by selling your winners and using the money to buy some losers.
"Sell high-performing investments and buy lower-performing ones"
However, Fool also gave a second method of rebalancing which sounds far more appealing - and sensible.
"Allocate new money strategically. For example, if one stock has become overweighted in your portfolio, invest your new deposits into other stocks you like until your portfolio is balanced again"
Yes, that sounds much more up my street.
And it was the method I was using already. New money that comes into the LM portfolio is used to buy new investments - but only if there are suitable investments to buy.
I certainly wouldn't randomly buy a share that has been falling in price. That's bottom-picking and like the other 8 billion people in the world, I'm no good at deciding when a share has fallen to what will prove in time to be its low.
So far the shares purchased to go into the LM fund have either hit a 52 week high or are showing some signs of being in an upward trend. They have upward momentum.
The only time they are sold is when they stop showing that upward momentum. Usually this is crossing under their 200 day moving average.
Poor performing shares are usually already under their 200 day moving average so I'd never consider buying them.
Reading the article wasn't a total loss as I learned something new. And after 17 years of reading about buying and selling shares that is quite significant.
This "rebalancing" theory may explain why there are investors out there who continue to buy THG even though it makes new lows day after day. They must be rebalancing...