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BobbyBe,

I will guess the rule 2 is missing a digit.

Just buying 20 different positions of stock and have them all be 5% is next to impossible.

After the first market day, some will be over 5% with others under.

It may be that rule 2 applies to initial sizes to spread risk across all positions evenly.

Those would be my guesses.


Does that help you?

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
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BobbyBe,

I will guess the rule 2 is missing a digit.

Just buying 20 different positions of stock and have them all be 5% is next to impossible.

After the first market day, some will be over 5% with others under.

It may be that rule 2 applies to initial sizes to spread risk across all positions evenly.

Those would be my guesses.


Does that help you?

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
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The way I manage my own portfolio is I never buy more than 6% of a company and then I let it grow to whatever it can. If you don't buy more than 5% of a company you can hold to the 20 positions.

However selling a company because it has become 5% of a portfolio is a sure way to minimize your returns.

Jeb
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TMFJebbo: "The way I manage my own portfolio is I never buy more than 6% of a company and then I let it grow to whatever it can."

You are playing in a whole different league than I am if you are buying "6% of a company".

"Section 13(d) of the 1934 Act and Regulation 13D thereunder require beneficial owners of more than 5% of a class of equity securities of a publicly traded company to file a report with the SEC. . . .

The Section 13(d) reporting requirement is satisfied by filing Schedule 13D with the SEC. Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. Schedule 13D must be amended promptly to reflect any material changes in the information provided. “Promptly” is not defined in the 1934 Act but is generally interpreted to mean less than two business days."

https://www.investmentfundlawblog.com/resources/investments-...

I have never come close to purchasing 5% (or 6%) of a company, and doubt that I ever will.

Regards, JAFO
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I think he means 6% of his portfolio value, not of the total company.
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kitsapkidd: "I think he means 6% of his portfolio value, not of the total company."

Yes, probably but that is not what was written.

But look at the progression of this thread.

BobbyBe wrote:

"Trying to set up and manage a rule breaker portfolio, David Gardner has four pieces of advice.

1. Select at least twenty stocks.
2. Let no stock be more than 5% of your portfolio at any time.
3. Let your winners run.
4. Add to your winners.

If I follow 3 and 4, won't I have positions that are larger than 5% of my portfolio quite quickly?"



TMFJebbo responded:

"The way I manage my own portfolio is I never buy more than 6% of a company and then I let it grow to whatever it can."

Even with your assumption about what TMFJebbo meant, he violates Rule 2 if he uses 6% of his portfolio to buy a single stock, he violates Rule 2 from the start. And letting it run, depending upon what the rest of the portfolio does might only increase he concentration of that single stock.

I do not subscribe to the Rule Breaker Portfolio, which is probably the best place for BobbyBe to ask his question.

My assumptions:

Rule 1 is intended to have a diversified portfolio, BWDIK. IIRC, Modern Portfolio suggests that it only takes about 14 well chosen stocks to be diversified, but if one is not careful in selection, one can own 30-40 stocks and still not be diversified.

Rule 2 is intended to avoid a concentrated portfolio.

NOTE - There does not seem to a rule covering selling the losers/less successful gainers, which surprises me.

Rule 3 is intended to avoid arbitrarily selling too soon. NOTE - Still not clear on when to sell if a stock stops gaining at the same or faster rate.

Rule 4 is discussing new money, and seems to be contradictory.

None of this speaks to the time to manage owning individual stocks. If one own 20 stocks and spends 5/minutes per day per stock, that would be 100 minutes, or 1 2/3 rds hour per weekday; that is a big commitment for someone who has a full-time job and other family obligations and is likely more time than most people spend exercising.

So I am with BobbyBe, the simple version of the Rule Breaker rules are contradictory.

Regards, JAFO
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