Every "Stock Trading Riches" Position is Ultimately Self-Correcting

I'm always amazed and excited when I think about how much my Stock Trading Riches system adjusts and self-corrects itself to actual market conditions.

Not only does each stock's average purchase price get adjusted through rebalancing, but even the stock itself is correctable. If you find fundamental reasons to no longer own a stock, its position can be easily switched over to another stock through rebalancing.

This is because the rebalancing formula is pure mathematics - it doesn't care if you plug in stock X or Y.

For example, suppose you were maintaining a constant value of $5,000 in Walmart and, after a particular year, your position was down to $3,000. Normally, you would buy $2,000 of Walmart.

However, if you lost faith in Walmart (for example, heard it might go bankrupt), you could choose another stock - say Target (it doesn't have to be in the same industry), sell all $3000 of Walmart, and buy $5,000 of Target.

You would then have a capital loss, and could say that Walmart was a failed investment. But, that is only if you viewed the position as a "Walmart position".

If, on the other hand, you took the view that it was a "$5,000 slot", and Walmart happened to occupy it for a while, and now Target occupies it, then ultimately it is not a failed investment.

In fact, if any given position can always systematically buy low and sell high serially across different stocks, then you can't really have a losing position in the long run.

At the high level, the "Stock Trading Riches" system is about splitting your portfolio up into constant dollar slots in which stocks are rebalanced to capture dividends and capital fluctuations. The slot can outlive any particular stock.