Dec

29

2005

Portfolio Position Sizing

Question:

What percentage of the entire portfolio does each position represent?

My Response:

Typically, each pick will represent anywhere from 5 – 15% of the portfolio, depending on the state of the market, the stock being purchased, if its purchased at the pivot or off of support, etc..  Currently, a standard allocation is $15K.   Positions that I consider core holdings such as a Google or an Apple might get 20K while lower priced, higher volatility positions might get $7500.  I always make smaller purchases in a shaky market and for purchases off the 50 day moving average.  These positions typically are $10K.  Of course as the portfolio grows these sizes will increase.  On average I probably hold somewhere around 10 positions which offers a nice blend of growth and diversification.  In order to provide a Model Portfolio that is more realistic I’ll be working to implement the ability to use margin, include commission fees, etc. [update: this was included for 2006 when I used 10% of available margin] I hope to have this done some time this January.  Leveraging with margin is an important tool in a rising market and can really accelerate gains. Good question.. thanks.