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Is Now the Time to Rebalance Your Stock Portfolio for Cash?

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It can depend on a few scenarios.

In this segment from Motley Fool Live, recorded on Jan. 6, Fool contributors Jason Hall, Trevor Jennewine, and Marc Rapport discuss whether it's time to adjust your portfolio by selling stocks that are down.

Jason Hall: "I've been buying on the way down and all out of cash. Some stocks pull back more than others. The question is, would it be a good time to rebalance portfolio now?"

I'm going to jump in real quick and then you guys can weigh in a little bit here too. I was looking at my portfolio today, and I know a lot of Fools watching probably have heard me talk about this before, but if you've never heard from me, I have a very broad portfolio, I own over 120 individual stocks, a couple of ETFs, and I'm always looking for a new stock that I don't own to buy.

But, I was looking at it and I noticed today that as of this morning about the time the market opened, I haven't looked at in the past hour, I had 20 different stocks that are down at least 60 percent from their 52-week high, that are within five percent and they're 52-week low.

These are stocks that are still down substantially. I can tell you right now, personally, the last thing I want to do is rebalance, moving away from any of those stocks that have fallen substantially that I still believe in, that I still like the thesis that the business is still delivering at this point.

With that said, something that I do about once a year is I go back and look through my portfolio and I check my conviction. I look at the business results of a company and I make a decision. Do I want to continue to own it? Trimming the weeds is the way David Gardner has described it and Peter Lynch has described it and then reallocate that capital.

If that's what you're meaning, I think it's worth considering, but it's very individual. If your thesis hasn't changed personally, I just find it difficult to really think about selling a stock. I think it's being really careful about that. Trevor?

Trevor Jennewine: I completely agree. I wouldn't try to rebalance anything right now, especially you know there's big chunks in my portfolio that are down quite a bit, and that just seems like a bad time to try to sell those stocks and move money around so I'm just leaving things where they are.

Hall: Marc.

Marc Rapport: I can't really add much to that except to say that unless your goals are changing, your priorities and suddenly your timeline has changed if rebalancing means getting rid of what you thought were good stocks because we're having a rough time right now overall, I don't know if that's the avenue I would necessarily take.

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