Be Patient With Your Portfolio

As a child growing up in the 1980s, I was utterly fascinated by the plasma globe, a novelty lamp first introduced by Sharper Image in 1987. A trip to the mall wouldn’t be complete without nagging my parents to let me stop by the store and play with it for a few minutes. I imagined having one of my very own.

Now, with 20 years hindsight, I can see what a downright foolish impulse it was to covet such a useless toy. The plasma lamp was undoubtedly cool, but with limited utility, especially for a 12-year-old boy.

It takes a certain level of maturity to realize that you can enjoy and appreciate something without owning it. Even now, I admire the precision engineering and design of the Audi TT, but don’t necessarily need to have one parked in my driveway.

The same sort of discipline should hold true in your portfolio. With markets having rallied sharply since March, investors now sitting on piles of cash are eager to get in the game. And while many stocks and sectors look attractive, the astute investor must concentrate only on his top ideas—whatever they happen to be. You simply can’t buy everything that that looks good and moves.

For example, I’m in awe of many of the advancements being made in solar technology within companies like First Solar (FSLR), Suntech Power (STP), SunPower (SPWRA). Yet in my portfolio, given my risk budget and existing holdings, I simply don’t have room right now. As much as I admire their technology and potential, they’re simply not on my list of must-own names.

One reason is that my first loyalty is always to the positions already held in my portfolio. On the rare occasion trades actually end up working out, I think you should do your darndest to actually stick with them, exactly why many of my previous favorites, Japanese names like Kubota Corporation (ADR) (KUB), Konami Corp. (KNM), Sony (SNE) and Mitsui & Co. (MITSY) have been held or even added to as equities have rallied. 

Between stocks, funds and ETFs, there are always a number of investment ideas that catch my eye. But because you can’t bet on everything, you must narrow down your favorites. You might appreciate a stock but simply not buy it. So pick your top names and leave the rest by the side of the road.