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Dan Kline discusses how he adds and adjusts his portfolio holdings.
I transfer money into my investing account every other week. It’s automated and I generally invest the money as soon as it clears.
In most cases, I invest the cash into my highest conviction stock — my 7investing pick — but that’s not always the case. Before I make the purchase I consider my existing position in the stock I have recommended. If it’s less than 15% of my portfolio then I add to my position. In cases where it’s more than 15% I generally allocate the money elsewhere.
A bit of balance
When I open a position in a stock it’s generally not more than 5% of my total portfolio. I may add to the position to bring it to 10% but after that I usually won’t add any more.
If, however, my holding in any company naturally grows to beyond 10% of my portfolio, I won’t add any more, but I also won’t sell off any of my holdings.
When I have a winner, I’m comfortable with letting it win. Currently, my biggest position is Microsoft (NASDAQ: MSFT). I’ve held it for around a decade and it’s up over 300% since I bought it. That has taken my position in the company to roughly 25% of my total portfolio, but I’m comfortable with that because I continue to believe that there’s both massive upside potential and very limited downside risk for Microsoft.
When would I trim?
In general, I don’t trim my winners. The exception would be if a riskier stock in my portfolio grew to a position above 15%, At that point, I would weigh whether or not the risk exceeded the upside. That’s not an easy decision to make and generally, I probably would not sell.
I don’t have any hard-and-fast rules when it comes to trimming or adding to a position. It’s more a gut feeling thing and me determining if a company has come close to playing out its thesis. In general, winners win and good companies find news ways to grow. Generally, that means I’m pretty comfortable with not selling even when a position grows to being above 15% of my portfolio.
When that happens I probably won’t add any new shares, but I’m generally pretty comfortable holding onto what I have. I only own shares in companies I truly believe in. If I stop believing, then I would likely sell my whole position rather than trimming it.
