Re-Balance Your Portfolio
Research for Online Investors

by John Dalt

12/18/09

We have one week left in 2009 It is time to re-balance your portfolio. This is simply reviewing your stocks and the amount of equity each represents in your portfolio. We suggest each position should represent approximately 5% of your total long-term  funds. If you only owned two stocks, and stock “A” has doubled and stock “B” is down 10% in the last year, you would sell 27.5% of stock “A” and buy 61% more of stock “B”. This is only if both started out with equal allocations in 2009

Another way to do this is divide the total long-term portfolio’s value by 20  Then sell or buy each of your holdings to the optimum position size of 5% of the total.

The reason we do this is to keep all positions equal with each other, so a 15% gain in one stock has equal weighting against your other positions.  This also serves to take money off the table of your biggest winners, and reallocate it to stocks you believe in, but may have lagged the market in the past year.

Here is the math:

Total portfolio value today:   $100,000.00

Divided by 20       =                     5,000.00

Optimum stock size position:   $5,000.00

If you are not fully invested, do your homework and identify stocks you want to own and the price that represents value for you.  Or, even better, subscribe to our Long-Term Portfolio and we will take a lot of the work out of it for you.  We are beating the S&P 500 by 25% year over year, and will have a new recommendation on Monday night.

It appears that the Copenhagen meetings will end without an agreement.  This is too good to be true, but don’t be suckered.  Maobama will work his hardest to snatch defeat from victory.  This is a signal issue for his most ardent supporters, where he criticized George W. Bush the most viciously.  He must produce something.

He also has painted himself into a corner with the Environmental Protection Agency (EPA).  China sees he is now committed legally to regulate ‘greenhouse gases’.  Why should they play along?  We are prepared to unilaterally disarm.  To use a military strategy, any good general would let the enemy defeat themselves.  China can win the war of commerce and world power without sacrifice.

Latest news out of Copenhagen is that Maobama has reached some agreement with China, India and S. Africa.  Details are sketchy as we rush to press.  Any agreement allows Maobama to save face, and come home ‘with something.’  I hope he didn’t lay down in a doorway to block Chavez (Venezuela) and Wen (China) from leaving.  I just hate to watch children have tantrums.

The paper tiger is exposed once again.  Reuters has the latest story, “World Leaders may drop 2010 climate deadline: draft”  I shouldn’t be surprised, most attendees seem to blame the U.S. for failure of the talks.  The U.S. is continually vilified by the U.N. group as the impediment to progress.  Some ‘progress’ does not warrant attention, but that just adds fuel to their contempt.

Our letter is short today as I have a Christmas lunch to attend. Old fraternity brothers call, and the call is strong. I assure you, NO lies will be told. Some may be heard!

To the Mailbag:
I did not expect that my views of government and the economy would be aligned with yours.  Obviously, you are a grumpy old man that has a handle on where we are going.  Great!---Subscriber R.A.

Thanks R.A., and welcome to our bunch of realists.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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