It's a terrible problem to have: that feeling that your portfolio has gotten just a little too big. Believe me, I know: I made the mistake of buying Nutrisystem
If this describes you, have no fear -- we're here to help, with five time-tested ways to reduce portfolio overperformance and bring your net worth back down to more familiar, comfortable levels.
-
Buy more stocks. This wealth-reducer works best if you view investing as a part-time affair. To be clear, I'm not talking about one or two, I'm talking about more like 40, more than you could possibly follow in a few hours a month. This works particularly well if you buy stocks on "hot tips" right after hearing about them, without doing any research. If your Uncle Louie the broker points out that those new roller shoes seem really popular with the kids, for instance, make sure to buy some Heelys
(NASDAQ:HLYS) stock right away. Not all of the stocks you buy this way will be stinkers, but some will, and those should reduce your net worth nicely. - Sell during corrections. The stock market is going down! Sell those big losers before you get burned! Failing to hold through a correction is a technique used by millions of individual investors to reduce net worth and limit the size of their portfolios. This one can even be automated: Set stop-loss sell orders on all of your stocks at about 15% below their current levels, and you're sure to have some sold during the next market hiccup. Presto, locked-in losses! Bonus technique: Hold the proceeds of those sales until the market fully recovers. No need to buy new stocks until the market is back up again.
- Trade a lot. If you spend much time watching CNBC or reading financial websites and blogs, you probably get dozens of stock ideas a day. It's tempting to make a few trades every day, isn't it? Give in to temptation! Buy on the spike, and, if it becomes clear a few days later that the stock isn't going anywhere (or that it's going down), sell and move on to the next one.
- Focus on one industry. Keeping your portfolio focused on stocks in one industry can be a great way to shed wealth. Since stocks in the same industry tend to move up or down together as that industry moves in and out of favor with investors, you can lock in broad declines across your entire portfolio in just a few weeks. Warning: Timing is everything with this technique. Buying a basket of the best Internet stocks in 1997 would have resulted in huge worry-making gains over the next two years; buying that basket in mid-2000, not so much.
-
Fail to pay attention. Not staying up-to-date on company developments is a great way to develop some losses over time. But again, it's not failsafe: Stick with small biotech stocks for best results, and avoid blue chips like Johnson & Johnson
(NYSE:JNJ) that seem to crank out solid results and dividends year after year.
Want more money-losing ideas? Then by all means don't click this link, because it'll lead you to the Motley Fool Hidden Gems newsletter service. That service offers up well-researched stock ideas every month, chosen by a terrific team led by Bill Mann and Founding Fool Tom Gardner, and has outperformed the market by more than 36 percentage points since inception. Worse yet, you can get an all-access pass free for 30 days. If losing is your game, forget this newsletter's name!
Fool contributor John Rosevear strongly suggests that you do careful research before adding any stock to your portfolio, especially if you're tempted to buy Heelys. He owns shares of Nutrisystem but doesn't hold any of the other stocks mentioned. Sadia is a Hidden Gems recommendation. Johnson & Johnson is an Income Investor pick. The Fool's disclosure policy thinks John got a little too much sun last weekend and really, really hopes that no Fool will follow the "strategies" given in this article.
