With regard to value & growth & REITs stocks, let's now examine different scenarios that every investor will face at some point:

1) (When) Should I buy more shares* of a company stock*?

2) When should I sell stocks?

3) (When) shall I rebalance my portfolio?

* share = a unit of the company stock

** stock = the term of the security as such

1) (When) Should I buy more shares of a company stock?

a) Savings plan

If you are having a savings plan, the answer is quite easy: You buy more shares automatically - irrespective of the stock price.

Here, you regularly buy shares on the cost basis (= your regular savings plan contributions).

As a result, the current daily stock price plays only a minor role, because the basic assumption is that stock prices will rise in the long run.

If you want combine your savings plan with occasional one-time purchases, you should check the current stock price and the current fair value in that situation (to avoid a one-time purchase of a currently overvalued stock).

In case you observe that the stock price has been decreasing for some time (and below the fair value), then it would be ok to buy additional shares via a one-time payment.

Provided that all qualitative/qualitative criteria appear to be in good order 🙂

Now this brings us to the question: How much money should I invest in such a scenario?

As a rule of thumb, I would recommend be rather cautious and invest approximately half of the amount (750 - 1000 $) of what an initial one-time payment amount (1500 - 2000 $) would be (see Point b) below).

If you are more courageous, you could consider paying up to the same initial amount again. But this should be really the maximum limit.

Because you can never predict how the stock price will develop in the future. It can happen sometimes that stock prices remain at a low(er) level, and the stock price does not approach yet its fair value for longer time... although their fundamental data are very good.

If this means too much "chaos" for you - no worries, then you can stick to your initial savings plan.

b) (Pure) one-time purchases

If you buy stocks only via one-time purchases, then the whole situation is a bit different, since you do not have a savings plan as a "backup".

Again, as a rule of thumb for an initial investment in a stock:

stock price must be below fair value (incl. considering margin of safety of approx. 20%),
and the initial one-time payment ought to be around 1500 - 2000 $

Now let's imagine you have done your homework (fundamental analysis, Fair Value calculation) and bought a stock. And after some time you see that its price drops.

Investors who want to buy additional shares cheaply, usually see the advantage of being able to cheapen their cost price of the stock... and then benefit again in the next up-move of the stock.

So far, so good. This is usually a realistic scenario.

But please consider: If you buy stocks at falling prices without a strategy, just because they have fallen in price, you might bring some problems into your portfolio:

It is by no means guaranteed that a share price will reach the old highs again. At least it can take a long time until then...
Many retail investors tend to buy additional shares at a time when the stock price is above the Fair Value ( = overvaluation).

That's why you should consider 2 options:

If you feel courageous: buy additional shares via investing approximately half of the amount of your initial one-time payment AND when the stock price is below the Fair Value
If you rather want to play the safe card: Do nothing.

2) When should I sell stocks?

We all are long-term investors - so it is not at all necessary to think constantly about selling.

It is empirically proven that investors with low turnover frequencies, achieve the highest returns in the long run.

Those who rarely replace their stocks save time, order costs and taxes and thus enjoy accelerated wealth accumulation.

However, I see 3 situations in which selling stocks should definitely be considered/recommended:

a) The company is being taken over

This happens sometimes. Those takeover/acquisition situations usually pay you a strong price premium. Which means that our asset growth accelerates.

But at the same time, you can no longer benefit from the future development of the company that you initially considered to be very exciting when you conducted the fundamental analysis.

A possible option could be: selling the "old" company's stocks and buying stocks of the company who executed the takeover/acquisition.

Otherwise you can sell the old company's stocks and look for another stock.

b) Stock price strongly exceeds the company's fair value

This would be a good signal to realise some capital gains (but attention: you pay taxes on them! 😒)

In the event that your initially invested capital doubles (or even more), there is a rule of thumb that I recommend:

Assuming you conduct a fundamental analysis and you invest 1500 $ in an undervalued stock. After a couple of years, the stock price goes north, and at some point your investment is worth 3500 $.
Here, you can apply following trick: You pull out your initial investment sum of 1500 $ (which you could then invest otherwise). So you have 2000 $ left. Which means that you have made no loss in your initially invested capital. And at the same time you benefit from the further returns/increases (2000 $) basically "for free". And you let this go with the flow.

So it is not necessary to sell the whole stock. You might consider selling only parts of it.

c) Changes of company's internal and/or external factors

That could be for example:

Non-comprehensible changes in the company's business strategy
Significant changes in the company's fundamentals
Poor earnings prospects
Management scandals / credibility issues
Balance sheet difficulties
Changes in business and customer preferences

Oh yes, this unfortunately happens sometimes... even in company's that you always considered to be high-quality companies.

If you come to the conclusion that those factors impair the company's sustainable profitability, then it's time to sell.

If it happens with a loss: Be it.

But if you buy quality companies, this luckily this rather happens quite rarely.

3) (When) shall I rebalance my portfolio?

Beside the correct selection of individual stocks, rebalancing is one of the most important disciplines in investment management.

In a nutshell: It's about adjusting portfolio weightings as part of strategic allocation in response to changes in the prices of individual stocks.

In the course of rising and falling stock prices, the weightings of the individual stocks in the portfolio change.

This causes the weightings to deviate from the strategically intended order of magnitude, which in turn leads to unwanted shifts in risk and can cost returns.

Rebalancing involves selling securities that have risen, and buying securities that have fallen.

There are various ways how to conduct a rebalancing strategy.

I personally would recommend to do the following 2 steps:

Weighting-based rebalancing
Rebalancing on a (bi-)annual basis

Weighting-based rebalancing is carried out whenever certain threshold values of the portfolio weighting of a specific security or asset class are exceeded.

For example, if a stock has a defined initial weighting of 5% in your portfolio, you could allow yourself a deviation range of 3-9%. Any weighting that exceeds this corridor, is brought back to the initial percentage level accordingly.

The advantage of weight-based rebalancing is that it can take place at any point in time and is therefore "closer to market action" and control is therefore stronger.

However, please bear in mind that the frequency of adjustment is also higher, which entails increased transaction costs!

So I would recommend not to overdo it.

Thus, rebalancing on an annual or bi-annual basis is sufficient.

Important: With regards to rebalancing, I personally would focus rather more on the selling some larger positions than buying additional underperforming shares (reason: see point 1b).

(Value/growth) Stocks & REITs: Buying (more), selling, rebalancing

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Module 1: Wealth creation - the big picture

Chapter 1: What is the overall purpose of this online course?

Chapter 2: "Wealth creation = Raising income + Investing"

Chapter 3: Building your personal financial infrastructure

Chapter 4: What type of investor are you?

Chapter 5: Investment Mindset

Chapter 6: Tracking my investment philosophy

Module 2: Investing in Equity ETFs & REIT ETFs

Chapter 1: Intro

Chapter 2: Objective ETF selection criteria

Chapter 3: Subjective ETF selection criteria

Chapter 4: Using ETF screeners for your search

[work in progress] Chapter 5: Live simulation... let’s buy ETFs together!

Module 3: Investing in Value Stocks

Chapter 1: Intro

Chapter 2: Fundamental Analysis (Step 1) - Pre-screening

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

Chapter 5: Fundamental Analysis (Step 4) - Fair Value and investment decision

[work in progress] Chapter 6: Live simulation... let’s buy value stocks together!

[in planning stage] BONUS: Value stock analysis with AI/prompt engineering

Module 4: Investing in Growth Stocks

Chapter 1: Intro

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

[work in progress] Chapter 6: Live simulation... let’s buy growth stocks together!

[in planning stage] BONUS - Chapter 7: Growth stock analysis with AI/prompt engineering

Module 5: Investing in REITs

Chapter 1: Intro

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

[work in progress] Chapter 6: Live simulation... let’s buy REITs together!

[in planning stage] BONUS - Chapter 7: REITs analysis with AI/prompt engineering

Module 6: Your personal investment management

Chapter 1: Investment strategies

Chapter 2: Portfolio compilation

Chapter 3: Situation management

[work in progress] ADD-ON MATERIAL

[in preparation] How to read balance sheets, income statemtents and cash flow statements

[in planning stage] How to monitor macroeconomic developments