Let Winning Stocks Run With Smart Position Limits
Learn how to optimize your portfolio with the AAII DI Rebalancing Tool. This guide explains how to manage position sizes, avoid concentration risk, and use the tool to balance your stock holdings.
A subscriber recently asked me about the AAII DI Rebalancing Tool. This programmed spreadsheet allows you to determine whether the stocks in your portfolio are overweighted or underweighted relative to each other.
As I was updating the spreadsheet, it occurred to me that some of you might have questions about position size. Position size is the percentage of your total portfolio that each stock accounts for. You don’t want it to be either too small or too big.
This week, I explain the strategy used in the Dividend Investing (DI) model portfolio as well as how the other AAII model portfolios handle rebalancing. I then go over how to use the DI Rebalancing Tool.
A quick side note before I begin: Our My Portfolio tool shows you the percentage weight for each stock you hold. You can use those percentages to apply the concepts discussed here. An updated version of My Portfolio with new features that you will really like is in the works. Stay tuned. I think you will enjoy the new version.