Wednesday, July 18, 2007

Diversification Part IV

Now I plan to talk about some of the new funds I am evaluating, and some of the moves I have made recently. Covered call writing will have to wait a bit longer.

I already mentioned that I sold 100 shares of SPXJX. Next up is a possible 25% cut of my position in the T. Rowe Price Emerging Markets Stock Fund (PRMSX). My rules (which admittedly need to be reviewed and possibly revised) call for selling 25% of my position with a 25% gain. I just increased that limit a bit since it was not taking into account the possible effects of short term capital gains taxes and trading costs. So for now, I'm staying put in PRMSX but if it keeps moving as it has, I'll end up selling 25% before the 1 year anniversary of its purchase.

However, further reflection would indicate that these selling rules should only apply to stocks and possibly ETFs. Mutual funds, on the other hand, are not designed to be traded as actively as stocks (and to a lesser degree, ETFs). With mutual funds, I think I should probably pare back my positions only as part of an overall portfolio re-balancing, otherwise I simply will not add to the existing positions. I'd love to hear the thoughts of others on this point.

At this point, I'll maintain my existing positions in PRMSX and SPXJX, and use the funds that I have available to take positions in FNMIX, RPIBX, and TREMX. Another monkey on my back is the fact that I still haven't identified the commodity investments that I want to add to my portfolio. Any and all suggestions are heartily welcome. I guess I'll have to do another post about the commodity positions in my portfolio, after I manage to actually take some.

Until next time...

No comments: