I am reading this book by Larry Swedroe and he brought up a point I would like to see if anyone has any comments on this.
He wrote about "regret avoidence" leading to 2 investment mistakes. "The first mistake is that an asset should be held only if it makes sense to do so in the overall context of the portfolio's asset allocation. What you paid for the security should have no bearing (except for tax consideration) on whether you should continue to hold it. The right question to ask is: If I did not own any amount of a particular stock, would I buy any at the current price to fit into my portfolio plan? If the answer is no then you should sell it, because everyday you continue to own the security at current prices you are effectively making a decision to buy it." (page 42)
The first sentence threw me. Aren't you supposed to hold assets that are part of your portfolio plan? Should you sell all given the current high P/E's? Is this market timing? I am asking this because I am trying to get a handle on what he means.
Thank you.
LovesLife
He wrote about "regret avoidence" leading to 2 investment mistakes. "The first mistake is that an asset should be held only if it makes sense to do so in the overall context of the portfolio's asset allocation. What you paid for the security should have no bearing (except for tax consideration) on whether you should continue to hold it. The right question to ask is: If I did not own any amount of a particular stock, would I buy any at the current price to fit into my portfolio plan? If the answer is no then you should sell it, because everyday you continue to own the security at current prices you are effectively making a decision to buy it." (page 42)
The first sentence threw me. Aren't you supposed to hold assets that are part of your portfolio plan? Should you sell all given the current high P/E's? Is this market timing? I am asking this because I am trying to get a handle on what he means.
Thank you.
LovesLife