I was talking with a college finance professor last week and I asked him what he thought was his best idea for portfolio management that isn’t widely accepted or encouraged as part of conventional wisdom. He told me this: “Only rebalance using cash, be it from investments or the new money you have available from your job.”
He said he learned that by forty years old when he saw the stocks he sold in his thirties to rebalance kept going up and raising dividends. You know the C.S. Lewis quote about how we are never entitled to know the answer to the question “what might have been”? Well, stock market investing is the one area of life the great Christian writer didn’t take into account. If you sell Coca-Cola at $35 per share when its quarterly dividend is $0.305, you will be there in 2019 when the stock price is $75 and the quarterly dividend is $0.60 per share. When you see that you traded that stock for some bonds yielding 3%, you might want to punch yourself somewhere.