No. of Recommendations: 9
...but I find it quite hard to trim such a gem, even knowing it's very likely overvalued. Nearly always regret trimming my long term flowers in the garden.
After years of back and forth, I have finally come to the conclusion that for me, it makes sense to trim things that seem overvalued...
but ONLY when I have a better idea at the time for deploying that money.
Lightening up on something pricey to immediately buy something else better is fine.
i.e., to buy just as good a security (in your eyes) but with a much better return in a reasonable time frame because of a better ratio of price to near term value.
For example, if I had cash in Apple today I wouldn't feel bad moving that into Alphabet today. (based on my own assessment of relative attractiveness--others may disagree)
But selling something pricey and hoping to get back into the same security at a better entry price is much more of a challenge. It's not guaranteed to make you better off.
You never know if the drop will come, or when, or how cheap it might get.
You have to be pretty darned sure that a meaningful drop is coming, and that's rare.
And the next day of cheapness might not even benefit you in absolute terms if it takes too long: the value can grow up to meet what was previously a high price.
I still do this sometimes, but only when my assessment of plausible near term returns actually turns negative.
Jim
