I have a question about a good problem.

[Anonymous]

#10115

When I started with you Sean I was dividing a smaller amount of money into thirds. But now with all this success I am dividing a bigger amount of money into thirds. What would you do when you look back at some of your first purchases and three thirds is less than one third of your new amount. Would you average down again to make then equal your new amount or would you leave them alone?

[Sean Hyman]

#10120

That is a great problem to have.

You want equal dollar weighted positions in each stock. So, you want them as close to fully equally weighted as possible. In other words, each stock…when fully invested should have about the same dollar amount invested whether that’s when its the initial position, or other one of the averagings.

Of course, as your account grows, you can ratchet that up very slowly over time (by gradually increasing the average dollar amount put in). But, keep in mind that also want cash set aside for when the market corrects severely and gives us even more opportunities for new picks and for fully averaging down on existing positions. But we don’t want to go over 3 equal dollar weighted positions in each stock (only exception being me authorizing a 4th position on one of our metals due to it not being a company that could ever go bankrupt and it’s a metal that has to be used).

[Anonymous]

#10122

Ok thanks for the info

[Sean Hyman]

#10125

You’re welcome.

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