What if an investor has already bought dozens of assets and is dissatisfied with the consequent mediocre returns? Here are a few steps that might lead to better outcomes:
- Evaluate the holdings carefully. The aim is to reduce one's tradable securities to not more than 5 if the market value of the portfolio is under $200,000 and to no more than 10-15 if closer to a million bucks or so. Are there some securities that clearly are of less value or for which there is much less conviction than others? Weed them out as decisively as if clearing unwanted plants from a favorite garden patch.
- Are there others that are more volatile than the market as a whole but in which there would be great hesitation before investing in more shares if the share price tumbles. These probably should go as well.
- Are there some for which significant information in available from one's brokerage(s) and/or from a library version of "Value Line"? If so, one can compare and contrast the remaining assets so that, ideally, the few gems are kept while the still held dross is disposed of.
- What may be more difficult can be deciding among investment methods: are some assets there, for instance, because they provide good, reliable dividends while others have excellent growth potential? What percentage of the total does one want representing each approach? If a strategy comes out the loser in this comparison, the next step is to figure out which of that technique's stocks are stronger, then redeem the rest.
- In general, stocks do best and are available as bargains in more compelling numbers when acquired during substantial market downturns, for instance when my mom picked Ford as a good long-term investment. So, we can examine the remaining stocks in our portfolios with this in mind. Is each as good as what could be bought the next time the market is down 10, 20, or 40%? Or is it no longer a healthy enough part of the portfolio that we shall want to buy more shares when the next bear market inevitably occurs? If such considerations would leave us with a much reduced portfolio, well and good. Extra cash reserves from the sale in this way of several assets can be put to excellent use once "Mr. Market," as Benjamin Graham called it, has offered us up a bounty of fresh bargains from which to choose, some of which may well be as enriching as Ford turned out to have been if bought in 2009. When he does, it will again be time to "back up the truck" and load it with terrific investment deals. The rewards of a carefully selected and concentrated collection of worthwhile equities, followed closely and with patience, may then become evident.