Pruning your portfolio

I’m the kind of person who has trouble letting go of things.   In the investment world you must be methodical and calculating.  Never get attached to your investments.   Make sure you have a process to prune the nonperforming positions and replace them with investments that could provide you better returns.

To prune my portfolio, I would take the list of active positions and analyzed them one by one.  The questions I ask when pruning are:

1) Would I invest in this position if I didn’t own it currently.

2) How much would it cost me (in taxes and transaction cost) to replace the position with something better.

3) Is there anything better out there to replace the position.

I suggest pruning your portfolios once a year.  A good time to prune your investment portfolio is the end of year holiday season.   You can take some time to reflect on the year and evaluate your portfolios.   I usually do this over a weekend in December.    For more active portfolios you might want to prune you positions quarterly, however remember that there might be tax consequences.

Please post any questions in the comment section.

Thanks for reading.   Have a great day.  

Please note: I reserve the right to delete comments that are offensive or off-topic.