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Shawn Lim asked 5 months ago

Good day to all!
Under portfolio management, it is suggested that if one intends to allocate maximum of 5% weighting per stock, one should not allocate the full 5% at a go. One should start off with 3% then allocate another 1% if the stock price drops by 10% to 20%. Another 1% when the stock price drops another 10% to 20%. 
Here is the question. May i know if there is any strategy if there is no drop in the stock price or maybe the stock price even rise. Do I only allocate 3% to the stock and just wait patiently for the drop in stock price. (Be it for months or years.) 
For discussion please. Thank you. 

2 Answers
Victor Chng answered 5 months ago

Hi Shawn,
 
Sometime, the price may not drop further and you may end up with just 3% stake. In such event, if the company continue to perform, you will not be able to purchase below your 3% price. Do note that good company continue to perform well and increase their intrinsic value. Hence, if the price is higher but the value is cheaper so you may average up in such scenario to increase your percentage. 

Shawn Lim answered 5 months ago

Thanks Victor for the explanation. 

Victor Chng replied 5 months ago

Welcome Shawn :)