Asked on 09 Dec 2019
What's your thought process behind allocating a large % of your portfolio to one stock, and in what scenarios would you do this?
I think this answer really depends on individual but let me share my opinion.
Some sources recommend 10 stocks and 10% each. Maybe some as war chest.
im really picky for my portfolio so I have 5-6 stocks and it's abit heavier each stock.
The heaviest position being 35% of my portfolio As I kept averaging down when there was a short report.
In the winning habits of warren buffet and George soros, theres a part about you call that a position. Have a stake that's enough to move your portfolio. otherwise it takes many many right decisions to move the needle. But this is controversial. I had some sleepless nights too haha
There are no strict rules, all depends on your risk tolerance.
And nobody, even professionals, can predict the course of a single stock, which is why
I (who still holds some stocks) discourage retail investors from buying single stocks.
Better stick with cheap and large ETFs, so you're much better diversified.
More of my thinking here: https://seedly.sg/questions/what-is-your-general-investing-philosophy-strategy
It depends on how many % of your investible capital you are prepared to lose per stock. Use diversification to your favour. If you risk x% of your investible capital for each stock, it takes all y stocks to become $0 to wipe out your investible capital:
x = 1, y = 100
x = 2, y = 50
x = 4, y = 25
x = 5, y = 20
x = 10, y = 10
Top Contributor (Jan)
For me its 10-15%. It all depends on your ability to handle volatility and risk. As long as you are comfortable, can sleep well, that is important when investing.
At my given age where I am able to handle a higher level of risk, I'd allocate 50% on a stock that is more volatile to hopefully help me grow my money at a quicker pace
About 10-15% for me. Unless I'm very confident about the stability of the stock and company management.
For me 50% is entirely possible. If you are convinced the stock has good managmenet and cash flow generating abilities
Maximum % to a single stock is not relevant in their early years of investing & constructing a portfolio, cos your first investment will immediately constitute 100% and subsequently get pared down as more news stocks get added. Think best is to focus on the absolute amount for each stock, as your porfolio size grew significantly down the road, then look at it by percentage
Top Contributor (Jan)
It depends on my capital, risk appetite, and investment horizon.
If it is a stock that has a good business model and I don't need the money urgently, I'm pretty comfortable with 100% allocation.
Here is everything about me and what I do best.