Wednesday, July 1, 2015

Bucking convention

0 comments

DEAR HARRY: I am going to question one of the most widespread of "conventional wisdoms." When my father died in 1985, he left my sister and me equal portfolios of stocks worth about $60,000 apiece. There were a few stocks he advised us to sell only in the direst of emergencies. At the end of the first year, our financial adviser wanted us to sell some of our stocks and buy bonds in order to maintain an allocation of 70 percent stocks and 30 percent bonds. I balked. This was contrary to everything I "knew" about stocks. Selling winners to buy losers made no sense. We did not do it. Instead we let the investments stand with occasional replacements within each group. Since I was a math teacher, it was easy for me to create a theoretical 70/30 portfolio and compare it with mine in performance. I am now way ahead with a portfolio that is 91 percent in stocks. The 70/30 portfolio improved slightly. This held true when I tested up and down markets. Am I the only maverick?

WHAT HARRY SAYS: In a word: Hellno! Many people reject the portfolio rebalancing that your adviser recommended. More than one guru has been challenged on the wisdom of this. It does have a potential advantage if all hell breaks loose. However, I have never seen the better numbers in the real world except when using selected past history. The very selection lends the opportunity for known or unknown bias. My advice to you is to hold on but keep careful tabs on the performance of your individual stocks.

 


Email Harry Gross at harrygrossDN@gmail.com, or write to him at Daily News, 801 Market St., Philadelphia, PA 19107. Harry urges all his readers to give blood. Contact the American Red Cross at 800-Red Cross.

Daily News Personal Finance Columnist
0 comments
We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy:

Philly.com comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by Philly.com staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
 
comments powered by Disqus
Also on Philly.com:
letter icon Newsletter