This would make a pie a little more like a tracker, allowing new money to be invested according to current actual stock weights rather than the initial weight.
E.g. 4 stock pie, initially each at 25%. Over time, A doubles, D halves, B & C are unchanged. Automatically weighting to current, would set the weights to, A 44.5%, B & C 22.2%, D 11.1%.
This could be done as a pie setting, so pie weights are continually adjusted (useful for auto reinvesting) or as a ‘reweight’ button on the edit pie.
As a part of this, on the holdings, edit pie weighting’s screen, show the current weight somewhere.
that strikes me as a backwards approach to managing your positions. invest more in stocks that have already risen and less in those that have dipped is a great way to lose a lot more money in any following correction.
a proposed self-balance function that invest more in underweight slices has a better potential to both keep your money at the chosen weight, and capitalise on lower relative prices from dips.
Not backwards, not for every pie type. Why wouldn’t you want to invest more in stocks that are doing well and less in stocks doing poorly. It’s how index tracking funds work.
So you’ve invested in a sector, the sector has really good prospects, but you can’t pick a winner and you’re funding monthly. Over time weights would change with the stocks doing better.
It’s not a bad idea. Backing your winners is always good in my opinion.
However, you are punishing stocks in your pie which could be perfectly great stocks to be backing, but you’re not depositing money into them as they’re not rising as quick as say the outlier that did.
IMO maybe sticking with by weighting should do a good enough job. I do the polar opposite by investing by self balancing so it invests in underweight stocks, but I do get your idea too which is definitely an option depending on your investing style.
But do you not thinking buying by target works well too? I don’t get the philosophy of fuelling your winners. By doing that you’re letting your other positions go and then what’s the point in holding them if you don’t believe in them? And by putting money in the ones that are doing well you’re pushing them further away from your target. So you’re overexposing yourself to the stocks that have done well relative to your targets.
But if you’re investing in risky stocks then maybe this makes sense. But for long term, strong companies I would be self balancing, buying the stocks that have gotten cheaper since last investment. Makes more sense to me.
But with investing my target at least you’re not letting the stocks run further than your target. As I said, investing by current weighting will push your well returning stocks further from their target and good luck letting that get back into balance without those stocks falling and the others gaining a lot or pressing the rebalance button which ideally you should keep clear from
because speaking honestly, if a stock has already gained compared to others in my pie, I am not expecting it to keep gaining. buying when the price is up dilutes your ability to get consistent returns.
fair enough if you are just tracking an index, but I would still recommend people keep to their fixed investing ratio or self-balance by buying more in the underweight portions to return the pie back to your target weights.
underperformers can have breakouts that only reward you if you built up while the price was low, it’s too late to capitalise on delayed growth if you decrease your investment in it over time just because it lags behind a more active growth stock.
warren buffett made the bulk of his wealth in the later years of his investing history, he didn’t see those returns grow by buying more into the overweight portions of his portfolio. the wait can be very much worth it if you pick a solid company and commit to your plan.
I agree with backing your winners to do well, but I only pie-invest in those I deemed winners to begin.
Guys, this is asking for the option not requesting a mandatory change. You don’t want to invest that way fine, the option would make tracking with a pie with lots of pieces much simpler than manually reweighting. And honestly I can’t think it would be that difficult to implement, at least on a button. I believe it would increase the utility of pies.
Because the first might be overvalued and the former undervalued.
If the stock that had a big drop is still a great company/business, it’s the time to put more money on it, not on the ones that had sky rocketed already
