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Curious if anyone has thought of or does reallocate their roth investments every time there are new recommended stocks. Because there are no tax consequences of selling stock I've thought about reallocating the stocks I'm invested in every time there are new recommendations from stock advisor. I get that the investing strategy is supposed to be long term but the assumption I would be making is that the newest recs are based on the most up to date information and therefore the best place to currently have your money. Has anyone tried this, is this a terrible idea?
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Curious if anyone has thought of or does reallocate their roth investments every time there are new recommended stocks. Because there are no tax consequences of selling stock...

Remember this also means that there is no tax benefit to a loss on sale against ordinary income. Not everything will be a winner.

IP
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No. of Recommendations: 6
Curious if anyone has thought of or does reallocate their roth investments every time there are new recommended stocks. ... every time there are new recommendations from stock advisor. I get that the investing strategy is supposed to be long term but the assumption I would be making is that the newest recs are based on the most up to date information and therefore the best place to currently have your money. Has anyone tried this,
is this a terrible idea?


Yes it is a terrible idea. But not for the reason you think.

It is a terrible idea because you are paying any attention to what some anonymous person(s) recommended. Why not just watch Jim Cramer's Mad Money and buy whatever he recommends?

assumption I would be making is that the newest recs are based on ...

Don't you get it that the newest recommendations are because they have to come up with new recommendation(s) every day/week? Because nobody is going to subscribe to a Stock Advisor Service that says "Buy XYZ and forget about it. Check back in 10 years to see if we changed our pick."

Until you know what you are doing, just buy a S&P500 index fund. SPY or VOO.

There. A "buy and forget it" recommendation, no charge. Check back in 10 years and the recommendation will be the same.
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I do it all the time.
In my Roth and my 457b (pre tax account).

I understand all the Warnings 101.
I am super happy with my results. Laying low for awhile.

MoneySlob
---------
88% YTD 75% cash as we speak.

Saul's portfolio for September:

https://boards.fool.com/my-portfolio-at-the-end-of-sep-2020-...

Saul's knowledgebase #1(beware, might not fit your attention span):

https://boards.fool.com/knowledgebase-2019-part-1-34381924.a...
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Well that certainly is one way to look at Stock Advisor. SA, RB, and a bit of other TMF services (with much support from the paid boards) helped me to a better than 20% annual return over eleven years. Which is why I view things a bit differently.

When I started with SA I had a pile of money converted to an IRA from a 401k. I spent well over six months very slowly converting the funds it started with to individual stocks. I didn't just buy the flavor of the month, I bought what looked good to me. Some good choices, some bad, but with time I learned. I still own five of those early companies. Dozens others have come and gone. But without Stock Advisor I never would have gotten started without it.

So my advice is no, don't swap around to the flavor of the month. Pick and choose, and when something is working (going up) hang on to it, and think about buying more even though the price has gone up. When you give a company time to perform, but it doesn't, look again at the new recs and best buys and make your best judgement.
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The sort of churn you are speaking of sort of defeats the purpose of being in Stock Advisor or any MF service here really. Often, companies are recommended with the view that they may not be profitable yet, may be volatile, may be the underdog right now, but the characteristics, disruptive capacity, leadership and focus of the company, make it an investment for the future. That is the reason behind having to go through the check list, when you sign up for a service, where it states holding for a period of 3-5 years. If you are churning stocks every recommendation day, then basically you are doing a modified day trading platform.

Keep in mind everyone has a perspective, but mine says it is wiser to take a longer view. That view point comes from a relatively short experience with TMF as I've seen it work. Choose your companies and hold them.

Allocate your funds and add regularly if you can. Calculate position size per company based on what percentage you are comfortable with a single position being in your portfolio. Then when new recommendations and best buys come out, review them. Research all those of interest and you feel comfortable with, keep a diary of why you invested in a particular company, what you are looking for them to do performance wise, what would change your thesis about them being a good investment etc. Then do your investing.

Keep in mind also that the minimum MF recommendation for number of positions is 15. In some services I've seen it as 30 positions. Diversification is the key.

Granted, not all positions are going to be winners, but you miss the chance on that multi bagger by selling each month and in the end, reduce your overall performance. From my experience, if I churned my portfolio once a month, I'd have missed out on at least 6 multi baggers I now hold.

Apart from that there is the chance you end up cost averaging up on positions. Say you buy a position one month at $40 a share, the position does not really do a lot and so you sell to buy something else for the next month. Then 6 months pass and during that time the stock is flat for the first couple of months and then it takes off the next 4 months and is recommended again, but now the price per share is $100. If you buy the rec then your new cost per share is $100 rather than price averaging. Also you lost all the gains on the initial shares you sold.
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...every time there are new recommended stocks.

For what it might be worth....

I've been holding individual stocks since the 1990s. One of the hard truths I've learned is that if you listen to retail stock 'analysts', you will almost certainly lose, or at best, dramatically underperform the market segment your holdings represent. Here is why....

1. Retail analysis are not there to educate, enlighten or otherwise inform you. They are there for their interests only, which includes things like encouraging an increase in trading volume, pumping a stock (usually small cap), dissing a stock they hold in short position or to support option positions they hold, subscribing to something or recommending a fund that holds that stock. They are not evil...just self-interested.

2. Recommended 'buy's or 'outperforms' or whatever bullish word is currently used, usually involves stocks that have been on a positive price trend for a while. Conversely, 'sell's (or equivalent) usually involve stocks that have been on a decline. The reason for this is the psychology of it, as it seems to make sense to jump on the bandwagon when things have been good, and off when prices have been declining. Unfortunately, this kind of advice is exactly the opposite of what the investor should be doing...all other factors equal.

If you don't know how to dissect an income statement, calculate the ratios of a balance sheet or trend cash flows off the Statement of Cash Flows...you probably should NOT be holding individual stocks. Instead, you should be holding funds, preferably low cost index funds that give you a broad exposure to market segments, that you rebalance each year.

Just one view

BruceM
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