How Much of Each to Hold

intermediate7 min read

Concentration builds wealth; over-concentration destroys it. Finding the line.

Position sizing is deciding how much of your portfolio goes into each holding. It’s the most underrated decision in investing — picking what to buy gets all the attention, but how much to buy determines whether a single mistake is a scratch or a catastrophe.

There’s a real tension here. Concentration is how fortunes are built — a big position in a great compounder can transform your wealth. But over-concentration is how fortunes are destroyed — one big position in a blow-up can wipe out years of gains.

Sizing decides your survival, and survival is the whole game — you can’t compound if you’re knocked out. A position small enough that its worst case is survivable lets you stay invested through anything; a position so large that one failure ends your plan means you’re betting the game, not playing it. Size so that no single holding can take you out.

ExamplePut 50% in one stock and it falls 80% — your portfolio drops 40% and may never recover. Cap each stock at, say, 5–10% and that same 80% collapse costs you only 4–8%. The pick was identically bad; the *sizing* decided whether you survive it.

Common mistakeLetting a winner quietly become 40% of your portfolio “because it’s doing great.” Unrealised concentration is still concentration — trim it back to a sane weight so one reversal can’t undo years of work.

Key takeawayPosition sizing controls how much one mistake can hurt you. Concentrate enough to matter, but cap each holding so no single failure can end your plan — survival first, then growth.

FAQs

How many stocks should I own?

There’s no magic number, but most direct-stock investors are well served by roughly 15–25 names, with no single position dominant (often capped near 5–10%). Fewer means higher conviction but higher risk; many more usually just recreates an index — at which point an index fund is simpler and cheaper.