Cycle Tom wrote:As I am new to this site I am not sure this is the correct forum. So forgive me. [It's fixed, thread moved - admin LadyGeek]
Today we updated our portfolio as of 1/31 and we are please with the gains for January. I was wondering if anyone would consider taking the gain, or a part of it, and just putting into their cash reserves? Was ondering if this is a wise practice.
My thoughts are to "grab" some of the profits should things change. If I did the portfolio would be no different than it was on 1/1/2013.
No, yes, maybe. The effect of what you are doing is to watch your risky assets gain a little, which means that you now have proportionately more invested in those assets and less in safe assets. Moving some back returns your portfolio to the original plan. This is called rebalancing and is recommended (see Wiki).
However, this has nothing to do with "grabbing" gain. If your stocks had fallen, rebalancing would say to take cash and buy stocks back to the correct proportion.
If you follow a practice of constantly converting gain to cash beyond just enough to rebalance, the result would be a shift to less stock and more and more cash. If your intention all along is to become more conservative as you go, then that works, but a better way to do it is to plan an asset allocation target as time goes by and move to that by some rebalancing scheme or another.