Two readers of this blog left couple of intelligent questions in comment section on some of the articles. Both of these questions relate to what I term as rebalancing the portfolio (or profit booking). I wanted to wait until I posted articles on TIPBlog portfolio update and risk analysis. I wanted to discuss these two questions in the context of TIPBlog portfolio. It will help better understand the re-balancing and profit booking processes.
You may have read earlier post that discusses risk analysis. I made a comment that the portfolio has overexposure on few stocks like ONGC, LNT, etc. I also mentioned that I will not be selling any partial shares to bring down allocation. Many use the term profit booking for partial selling.
Media pundits and business experts are again beating the drums of bonus shares from Reliance. And we all individuals, without giving the thought, start beating the drum of the bonhomie, and are rejoicing that we are getting something for free. Because it is termed as “Bonus”, it is free and we all should be happy for it. Happy that company management is thinking about shareholders and giving them “Bonus Shares”. Coming from school of “value thinking” I believe this is fools paradise. We have lost our ability to think rationally and then make a judgment call. Let us discuss little bit more….
One of the most neglected aspect do-it-yourself investors is performing a realistic assessment of their portfolios. I have adopted a very disciplined approach to make sure I follow my quarterly regime of reviewing the progress. First step was to check out the status. Second step is to understand risk, and third step is to make changes (or execute or re-balance if necessary).
The 3Q2009 can be summarized as quarter of recovery. In my post 
Habits and Addictions are two terms we use in many contexts in our daily lives. At the root of it, it is and action/activity that one has to do at regular frequency or in certain way or at specific time, etc you get the point right. Now, if those necessary activities or actions are good we call it habits (in most context), and if those activities or actions are bad we term it as additions. In investing, we individuals need to develop habits.
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