Weighted allocation is all about rebalancing your portfolio.
For example, let’s say you have 10 stocks in your portfolio and each stock has a weighted allocation of 10%. If one of those stocks is experiencing a high share price growth rate where the percent increases from 10% to 20% or 30%, then you have two options.
- Option 1: You can sell shares of that stock to even out the percentages.
- Option 2: You can buy more shares of other stocks to even out the percentages.
The question is, should you worry about weighted allocation?
That depends if you are in Wealth Building Mode or Wealth Protection Mode.
Wealth Building Mode
If a stock continues to see a high share price growth rate, is On Sale, and has a 4M of 80 or higher, then we don’t recommend selling shares. We recommend holding the stock and letting that stock build your wealth. We only recommend selling if the selling criteria are met. Please reference the When to Sell article for a refresh.
Wealth Protection Mode
If you are in Wealth Protection Mode, then you may want to consider selling shares to keep your portfolio balanced. However, we don’t recommend selling dividend stocks especially if the dividend stocks have a Summary of On Sale or Watch. In this case, keep holding the dividend stocks so you continue to get paid a dividend every quarter. If you don’t want to continuously buy and sell shares to rebalance your portfolio, then you may want to consider buying a few Index Funds, ETFs, or Mutual Funds.