What Makes a Rule Breaker Investor | Summary and Q&A

TL;DR

Learn how to effectively manage a rule-breaking portfolio by adding to winners, diversifying positions, and keeping cash allocation low.

Key Insights

• ❓ Portfolio management is a personal and contextualized approach, without a one-size-fits-all solution.
• 👻 Rule-breakers tend to add to winners and allow positions to grow outsized, while minimizing trimming activities.
• 🇨🇷 Dollar-cost averaging can be beneficial for rule-breakers to average their cost basis over time.
• 😘 Maintaining a low cash allocation in a rule-breaking portfolio maximizes returns.
• 🖐️ Personal circumstances and individual investment goals play a crucial role in portfolio management decisions.
• 🍳 Being aware of oneself and making decisions accordingly is essential in managing a rule-breaking portfolio.
• 🍧 The market's performance fluctuates, but having funds invested most of the time is optimal for maximizing returns.

Transcript

hello RBI podcast greetings to david from listener number 349 I'm touched that you're counting first off I've listened since the first podcast really enjoyed the content a question for mailbag we've talked about buying great companies we've talked about when to sell but my conundrum is how does a rule-breaker manage a rule-breaking portfolio when d... Read More

Questions & Answers

Q: How does a rule-breaker manage a rule-breaking portfolio?

Rule-breakers manage their portfolios patiently, steadily adding stocks and diversifying positions over time. The emphasis is on adding to winners and allowing positions to grow outsized.

Q: When does a rule-breaker add to their position in a stock?

Rule-breakers tend to add to their positions when the stock is a winner and within the first year of their initial purchase. This strategy is followed as long as the thesis for investing in the stock remains intact.

Q: When does a rule-breaker trim their positions in a stock?

Rule-breakers rarely trim their positions. They are willing to allow their winners to grow outsized and even become a significant portion of their portfolio. Trimming is considered only in exceptional cases.

Q: Does a rule-breaker dollar-cost average?

Dollar-cost averaging can be an effective strategy for rule-breakers. It involves mechanically adding funds to the market and into existing positions to average out the cost basis over time.

Summary & Key Takeaways

• The speaker manages multiple rule-breaking portfolios patiently, adding stocks over time and diversifying positions.

• Instead of selling, the emphasis is on adding to winners within the first year of purchase and allowing positions to grow outsized.

• Dollar-cost averaging is recommended, and the ideal cash allocation in a rule-breaking portfolio is close to zero percent.