Position Sizing

The process of determining how much capital to allocate to a single investment or trade relative to your total portfolio. Proper position sizing ensures that no single losing trade or failed investment can cause catastrophic damage to overall wealth. A common framework allocates larger positions (50-70%) to high-conviction, established assets and smaller positions (5-15%) to speculative bets. The core principle: never size a position so large that its total loss would meaningfully impact your financial well-being.