Author: emma06 Date: 2/26/02 2:26 PM Number: 33888
As a retiree with a diversified portfolio I was curious how us older folks handle buying and selling of stocks in and IRA. Are we all of the buy and hold theory ? Do any of you sell some shares in their winning stocks to take profits, only to buy back in when the stock dips below the previous sell price ?

Most successful investors will tell you not to try to time the market.

Since you mentioned that you have a diversified portfolio, then you must have a chosen asset allocation (at the minimum a percentage of stocks vs. bonds).

The general rule for a diversified portfolio is to rebalance it regularly to maintain the target asset allocation percentages. Most people rebalance on a yearly basis.

The reason for rebalancing on a regular basis is that it forces you to sell some of the assets that have appreciated to buy more of the assets that have gone down in price. This has the important effect of 'Buying Low and Selling High' that many people only dream about.

You should also rebalance the stock portion of your portfolio as well. For instance, if you have ten stocks, and you decide to put 10% of your equity money into each one, then at rebalance time, (after careful study to determine that these are the same ten stocks you want to hold for another year),you should the gains on the winners to buy more of the losers. Again, this forces you to buy low and sell high.

I highly recommend that you read William Bernstein's book, 'The Intelligent Asset Allocator'.

RK