Thoughts on Selling to Lock In Gains

[hendi_alex]

I always have target weightings in mind. Just the act of re-balancing would capture some of those gains so that they can be deployed into something that appears to have greater current value. On the other hand, the market can be quite irrational in the way it values a company's share price. Why not harvest those gifts when there is a serious disconnect between the value of the shares and what you feel that the company is actually worth. If the disconnect is real, then the share price will always drift back down to a more reasonable valuation to provide a fresh entry. Given that we can never make a 100% accurate assessment on such things, it makes sense to me to always keep some portion, that which is considered the core holding. That way if the market is correct, and the shares just keep going up, never to look back at the previous price level, the portfolio is still along for the ride with those retained shares.