Author Topic: If you invest in individual stocks do you follow any "rules"?  (Read 669 times)

K-ice

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I know the MMM crowd is big ETF fans. But if you DO invest in individual stocks do you follow any rules?

I know there are some TESLA folks out there.

One good rule I know is don't let any single stock be more than 10% of your portfolio.
Don't let any single sector (like health care, energy, banks, etc) be more than 20% of your portfolio.

What about selling? Would you sell if it goes up or down x%? Sell if they cut their dividend?

Perhaps you are buy and hold no matter what... 

I am looking for some consensus or good reading material. Thanks

PDXTabs

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Re: If you invest in individual stocks do you follow any "rules"?
« Reply #1 on: April 22, 2021, 08:54:41 PM »
One good rule I know is don't let any single stock be more than 10% of your portfolio.

I don't let all of my individual stocks combined reach more than 10% of my portfolio. Or rather, 90% of my portfolio is autopilot index fund stuff and I'm allowed to play with up to 10% of it, although right now I'm only in individual stocks for ~1%.

K-ice

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Re: If you invest in individual stocks do you follow any "rules"?
« Reply #2 on: April 22, 2021, 09:02:45 PM »
I don't let all of my individual stocks combined reach more than 10% of my portfolio. Or rather, 90% of my portfolio is autopilot index fund stuff and I'm allowed to play with up to 10% of it, although right now I'm only in individual stocks for ~1%.

Sounds reasonable. Mine are 2.5% combined but I may look into a bit more.

MustacheAndaHalf

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Re: If you invest in individual stocks do you follow any "rules"?
« Reply #3 on: April 23, 2021, 10:01:49 AM »
Counting only 2020-2021, yes.  I try to diversify my stock picks, like I'm running my own index fund.  Do I have health care? tech?  industrial?  energy?  ... the more sectors of the economy, the better.  Similarly, if two stocks overlap, that might be a sign to sell one of them.

When I hear financial news (like on CNBC), I realize everyone now knows what I just heard.  So if there's a stock with interesting news, it's too late to act on it.  I think it's important to avoid picking stocks in that situation.  Besides picking stocks, it's important to know what to ignore.

reeshau

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Re: If you invest in individual stocks do you follow any "rules"?
« Reply #4 on: April 23, 2021, 10:14:45 AM »
For the bulk of my portfolio, I follow the investing method of BetterInvesting, which is essentially a kind of GARP analysis.  I do also invest in early stage and turnaround opportunities, too, but those are much more laborious to study and understand properly.

Portfolio management is important, too.  I have found an interesting complication since FIRE'ing, trying to trim my winners who have exceeded portfolio maximum, which also managing my taxes and ACA spending.  If I was all tax-sheltered it wouldn't be a problem.  And while I have managed in the last year, I can see a point in the future where my taxable account may get bound up in all winners, not just causing income to jump but also keeping me from investing a lot of the taxable account in new ideas.  Something to noodle on as I gain direct experience.

 

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