Rebalancing a Stock Portfolio

Even the most diversified portfolio will get unbalanced after a while. Some stocks will inevitably outperform others until you have a few stocks dominating your portfolio. Despite your "buy and hold" investment strategy, it is a good idea to shift your stocks around every once in a while so that you don't expose yourself to too much risk from being overly invested in one or two stocks. One way to deal with this is to sell half of a stock each time the stock doubles. Reinvest the money in a different stock. The benefits of this approach are that you lock in your earnings and avoid a portfolio that is weighted too heavily on your one or two top performing stocks. The downside is that you could lose out on the future growth of the company. Keep these things in mind when you are re-balancing your stock portfolio.