De-Risking

I decided today to de-risk my portfolio a bit. Europe just has me out and out nervous. I had not done any pruning of note in a while. Here are the steps I took:

1. Sold 1/3 of my STD (Spanish bank) holdings. I still have plenty, that really just took them down to an average sized stock holding.
2. Sold all my UNTD. They have a pretty large amount of debt and I am worried about declining income.
3. Bought Endurance preferred stock (ENH-PA), which works pretty much like a bond with a 7.4% yield.
4. Bought some AUY (gold miner recommended by Jubak). They only have a 1.3% yield, so for the time I will not call them a dividend stock (unless they increase dividend).

To Reinvest or not to Reinvest?

I read an interesting blog on what to do with dividends (Why I Choose To Collect My Dividends As Cash). As my readers know, I prefer to reinvest my dividends and then revisit my portfolio a few times a year and prune or sell stocks. I guess I do this for several reasons:

1. If I do not reinvest, I may end up spending the money.
2. By reinvesting automatically, I try to take out some of the emotion. This when, if and when the market tumbles, I will just automatically be buying more shares at cheaper prices.
3. I do not want to spread my portfolio over too many stocks (25 to 30 is my goal). If I gather dividends and buy "new" stocks I fear my portfolio will get too large. I'd rather stick with my 25 to 30 best ideas.

When I read Graham's "The Intelligent Investor", he said that a decent approach is to pick what percentage of your assets you want in bonds and what % in stocks. Then stick with that split. Then if the stock market goes on a run over a couple of years, you will be automatically selling stocks and buying bonds (which again takes some of the emotion out) and conversely when the bond market has a good run, you will move some assets. It does make sense.

This article pretty much sums it all up (The Trouble With Humans Why rats and pigeons might make better investors)

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