Effectively, 90% of my net worth is in the markets... this year has been good to me and my net worth has doubled with that 50% in ATM the funds taken were used for my US holdings.Quote:
Harry Markowitz has a lot to answer for..eh :(..
To be fair to Harry the key word in the Portfolio Theory is "allocate"..which suggests at commencement (or accumulate/sell during.. thus altering the portfolio metrics)...It's all the do with the level of risk you as an investor is happy to put up with and then mathematically find the maximised capital gain to that level of risk you assigned yourself to (usually the higher the level risk requires a higher level of return (maximised = most efficient way).. It says nothing about derisking during a huge capital gain event unless there's a sudden risk increase..It would make no sense would it as it would be contrary the Theory's principle of maximising capital gain..also derisking (selling) your lowest risk asset (best performer of making a capital gain) is contrary to the principle as it could dramatically lessen the portfolio maximising power of making a capital gain and also push the risk to the outside of your assigned risk perimeter resulting in a much less efficient portfolio..
I amazes me the investors (including myself sometimes) realising their profits (profit-taking) on their best performing stock and keep their dogs (badly performing stock) in the hope that some day they may get their money back. That is the exact opposite to the Principle..(Very inefficient portfolio = high outside assigned risk perimeter with minimising capital gain)
It is a complicated mathematical method that has to be recalculated very often as they are all variables... but there are simplistic methods for us plebs..There's a rule of thumb "buy/accumulate in up trending stock" ..and... "sell/don't buy downtrending stock" (high risk to capital gain).
Holding onto a downtrending stock can alter the risk/maximum capital gain metrics within one's Portfolio to the point that the resulting higher percentage risk becomes outside your established risk perimeter thereby creating a sell of the offending culprit to lower the risk back into the established perimeter thereby raising back up the efficiency of the portfolio (risk/maximised capital gain)..
Conclusion:..you should not have sold...