Balancing my Portfolio Sector Weighting

This past winter the collapse of oil prices and the reduced forecasts in global growth (mainly China) have brought about some deep bargains in the Energy and Industrial sectors. During the sell off I purchased a little too much of a good thing. In doing so my portfolio became overweight in these sectors and too unbalanced for my liking. I try to keep each of the 10 sectors weighted between 8%-12%.

With the recent rise in the market and oil prices up 40% from the Jan 20th $27.10 low I’m trimming my Energy and Industrial sectors. This is a small trim only about 3% of my total portfolio, not only will it help balance my portfolio, but will free up cash for possible future bargain hunting.

That said, I’m selling my CVX (energy) and CAT (Industrial) positions, both for slight gains between 6-8%. Normally I rarely sell as I invest to build passive dividend income that will provide for my future retirement needs. However, in this case I believe it is a good opportunity to balance my portfolio to improve my diversification and since these stocks are in my IRA I will not incur any capital gain tax.