Motley Fool Answers' July Mailbag: When Is It Time to Rebalance My Investments?

If there's one thing Motley Fool Answers hosts Alison Southwick and Robert Brokamp enjoy, it's hearing from their listeners, so they particularly relish the monthly mailbag episode. But even they can be overwhelmed by the quantity and breadth of those queries, so this time around, they've invited a couple of friends to help out: serial podcast guest Jason Moser and Answers newbie Abi Malin.

In this segment, they get into questions that are important for investors, but that lack cut-and-dried answers. At what point do you sell your winners in the name of portfolio balance or diversification? How much weight do you want one stock to have on your results? Is there a set minimum number of stocks you should be holding?

A full transcript follows the video.

This video was recorded on July 31, 2018.

Alison Southwick: The next question comes from John. "My dad helped me open a Roth IRA when I was 16 by cashing in a U.S. savings bond I was given as a baby. It started off at around $2,000. In 12 years of depositing what I could and with the help of Motley Fool Stock Advisor, my Roth has grown to over $60,000. At this point my account has 12 stocks and two index funds.

"At the beginning of 2016 I bought into Vail Resorts based on a Stock Advisor recommendation. Since then the stock has more than doubled and is now more than 15% of my portfolio. This has me wondering. How much is too much to have in one stock? Does it make sense to sell off some of a winner in order to get closer to the recommended 15 stocks?"

Robert Brokamp: This is a tough one.

Jason Moser: It is. The answer is going to be different for everyone, John. Personally, I feel like if your goal is to get to this recommended 15 stocks in your portfolio. That's fine. I don't know that I necessarily would want to sell a winner in the name of getting there. It's OK to not have 15 stocks in your portfolio.

Southwick: It's not like a golden number where something clicks in.

Moser: Exactly. You don't get a prize. We use that as a benchmark for a lot of folks because most people don't invest in just individual stocks. They tend to invest either in 401(k)s or funds or whatever, so 15 is just a nice number that we use. You may have fewer. You may have more. It depends on what helps you sleep at night.

Regardless, if you're asking would I sell off a winner in order to get to that 15, no I wouldn't. I tend to feel like if one stock is making up at least 20% of your portfolio, you better know what that company is doing and you better feel pretty confident about where it's headed. That's still OK if you're hanging onto a really good company. I just don't want to sell winners unless I have a really good reason to do it. It's really fun to let those winners run.

Southwick: Unless you have a better place for it.

Moser: Right! A very good point -- unless you have a better place for it. And again, you could sell that winner, but then you also have to remember that you better be right on the companies where you're putting that money, because you could be wrong and then you feel kind of foolish that you sold off some of a winner just to get to some arbitrary number like 15 stocks.

Abi Malin: I think it's also worth noting. Usually we say 15 just for diversification, but if you own funds you're already getting a little bit of diversification. I would second Jason's answer on this.

Brokamp: And I'll just commend John and his dad for opening a Roth IRA when he was 16.

Moser: Yes.

Brokamp: His saving for retirement is definitely off to a good start.

Moser: The right age to get it going.