Quality Investing with René Sellmann

Quality Investing with René Sellmann

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Quality Investing with René Sellmann
Quality Investing with René Sellmann
Why Trimming Your Portfolio Isn't the Solution: Focus on Selectivity Instead!
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Processes & Mental Models

Why Trimming Your Portfolio Isn't the Solution: Focus on Selectivity Instead!

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Rene
Oct 10, 2024
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Quality Investing with René Sellmann
Quality Investing with René Sellmann
Why Trimming Your Portfolio Isn't the Solution: Focus on Selectivity Instead!
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I see posts of investors critically reflecting on the number of holdings in their portfolios ALL THE TIME ...

It's almost a pattern: at some point, most investors reach a point where they realize their portfolio of 30-40 stocks is too unwieldy to manage effectively.

To address this, they often decide to trim their holdings down to a more focused selection of fewer than 20 stocks, allowing them to closely follow each business.

So far, so good. Critically reflecting on past decisions and acting on those reflections is an important trait every successful investor needs to have!

However, the problem lies in the urgency with which they execute this strategy. Attempting to downsize a portfolio by 20-50% within just a few weeks or months will often lead to hasty, non-rational, suboptimal decisions.

This rushed approach forces investors to sell stocks not based on a well-thought-out analysis but simply to meet a self-imposed target, which inevitably harms overall returns.

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