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Wednesday, March 10, 2010
The Dow Transports closed above their Jan. 11 closing high of 4,262.86. If the Dow Industrials confirm…
Real Questions from Real Subscribers
Q: How does Forecasts deal with variable performance in maintaining a portfolio? Is keeping an equal weight of all stocks realistic?
A: Dear Subscriber,
Our target prices are guidelines, not rules. In practice, it is too expensive for most subscribers to rebalance their portfolios every month. But when possible, we advise readers to buy stocks roughly in proportion with our target weights. As a rule of thumb, we advise most investors to avoid letting any single stock represent more than 5% to 7% of a portfolio, and our preference is for smaller holdings. Still, only you can determine whether your rebalancing costs are too high relative to the size of the portfolio. There is no cookie-cutter answer when it comes to rebalancing.
Thanks for your interest,
Bob Sweet, CFA
Managing Editor, Dow Theory Forecasts
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