While I do encourage people to invest for the long run, there are times when I move from a passive stance to a slightly more active stance. Without having to invest more money into my portfolio, stock switching allows me to make my portfolio work harder and generate more returns for me.
Rebalancing
This is generally used by people who have a portfolio of stocks which they are comfortable with and would prefer that they remain at set percentages of the portfolio. Some Stocks may have run up significantly. Value wise, these stocks become too high a percentage from asset allocation perspective, rebalance by selling them and buying undervalued counters. For example, if you have stock A, B, C and D in your portfolio which are 25% each in weight. If C goes up dramatically, it may become A – 20%, B – 20%, C – 40%, D – 20%. ...
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