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  • Writer's pictureStephen Walters

Why I like themes, and when to sell

The Dexterity portfolio seems to have settled, to begin moving in the right direction again. I acknowledge both benchmarks have closed some of the gap. A reader offered me some helpful feedback last week; invited me to be less 'general' in my comments. I'll do my best. The chart I'm showing here is from Yahoo finance, and shows a two-year plot of a famous volatility index (Chicago Board of Options Exchange). From it I get a clear message that volatility starts abruptly; too swiftly for me ever to sell before the damage occurs. I tell myself if I'm not willing to hold through a downturn I shouldn't own at all. For that reason alone I support themes I'd like to hold for the rest of my life. Six reasons I judge valid to sell:

  1. When the value drops to whatever stop-loss point I’ve chosen.

  2. When the story changes – eg, a shift in political power; inflation gives way to deflation.

  3. When instinct warns or disturbs my peace-of-mind – not to hold with over-optimism.

  4. When I feel happy with a profit, I might want to ‘bank’ it.

  5. When something else I think has higher potential for gain, and/or lower risk of loss.

  6. The same theme offered by a different issuer for a lower charge.

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