How to size a position in a portfolio
In portfolio construction, a formula is worth more than a feeling
There is no perfect answer to how much of a portfolio a single stock should occupy. What matters more than finding the “right” number is having a rule at all. A pre-set formula for how much to invest, and when, removes the guesswork—and the emotion—from what is otherwise one of the most consequential decisions an investor makes.
Two approaches illustrate how such a rule might work.
