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Lifted from “p2-asx-weekly-portfolio” thread.

I've decided to make a post about "Portfolio position sizing", a current discussion in the “p2-asx-weekly-portfolio” thread.

What a great post
[USER=50018]@Newt[/USER] posted an "alternative view" about 'optimal portfolio position sizing' in the “p2-asx-weekly-portfolio” thread relating to his own experience & research. Newt has put forth a compelling argument even posting an optimisation chart that corresponds to his views that differs from the actual results trading a 40 position portfolio. It's refreshing how Newt explained an alternative point of view in a respectful manner that others could understand.

My views
All the posts I've made are written to pass on my experience I’ve gained over the years explaining that there is an alternative point of view or a different way of thinking about issues that may be beneficial to others, a little contrary to the accepted norm.

Psychological and behavioural reasons
As [USER=13908]@peter2[/USER] eluded to in the “p2-asx-weekly-portfolio” thread - there are obvious “psychological and behavioural” reasons why a 30-stock portfolio is preferable to a 10-stock portfolio. There are fantastic risk/reward opportunities that you are willing to do at 3 per cent of your portfolio that you might be unwilling to do at 10 per cent. Historically it’s only a handful of stock that accounts for the bulk of market returns & having a 40 position portfolio gives you a fighting chance to find those handful of stocks that eliminates the risk of serious under performance.

Large enough to be meaningful
A 40 position portfolio has a meaningful allocation or otherwise you risk missing out on significant market opportunities. Your portfolio has to large enough to have a meaningful position size in each. I’m not after sector performance but rather I'm after the top 40 stocks that make up the All ordinaries. Also trading a large account position sizing is critical for slippage. (Reference: "Slippage" refers to the difference between the expected price of a trade and the price at which the trade is executed)

Under performance
My research is contrary to [USER=50018]@Newt[/USER]'s findings in-as-much that a portfolio with a smaller position sizing in their portfolio 'under perform' whereas a 30-50 stocks in a portfolio for me is the “sweet spot” & that is what I aim for. In saying this there is no ideal number of stocks you should own, that is for your research & the strategy being traded.

There are factors you should consider
‘First’, how actively do you want to manage your portfolio?
‘Second’, you should decide how much risk you are willing to take &
‘Third’, this goes along with your risk to some extent, but you should consider if you are looking to be serious in this game as the quantity of positions in your portfolio can be a game changer.

It doesn't matter
The maximum number really doesn't matter.

If you're trading long-term
Buy when "you have all your ducks in a row" & sell when the stock goes 'stale' (stagnates) or after the position has reached its peak, crested & on the way down, it's not rocket science.

Skate.

<blockquote data-quote="Skate" data-source="post: 1039772" data-attributes="member: 57364">Lifted from “p2-asx-weekly-portfolio” thread.I&#039;ve decided to make a post about &quot;Portfolio position sizing&quot;, a current discussion in the “p2-asx-weekly-portfolio” thread.What a great post[USER=50018]@Newt[/USER] posted an &quot;alternative view&quot; about &#039;optimal portfolio position sizing&#039; in the “p2-asx-weekly-portfolio” thread relating to his own experience &amp; research. Newt has put forth a compelling argument even posting an optimisation chart that corresponds to his views that differs from the actual results trading a 40 position portfolio. It&#039;s refreshing how Newt explained an alternative point of view in a respectful manner that others could understand.My viewsAll the posts I&#039;ve made are written to pass on my experience I’ve gained over the years explaining that there is an alternative point of view or a different way of thinking about issues that may be beneficial to others, a little contrary to the accepted norm.Psychological and behavioural reasonsAs [USER=13908]@peter2[/USER] eluded to in the “p2-asx-weekly-portfolio” thread - there are obvious “psychological and behavioural” reasons why a 30-stock portfolio is preferable to a 10-stock portfolio. There are fantastic risk/reward opportunities that you are willing to do at 3 per cent of your portfolio that you might be unwilling to do at 10 per cent. Historically it’s only a handful of stock that accounts for the bulk of market returns &amp; having a 40 position portfolio gives you a fighting chance to find those handful of stocks that eliminates the risk of serious under performance.Large enough to be meaningfulA 40 position portfolio has a meaningful allocation or otherwise you risk missing out on significant market opportunities. Your portfolio has to large enough to have a meaningful position size in each. I’m not after sector performance but rather I&#039;m after the top 40 stocks that make up the All ordinaries. Also trading a large account position sizing is critical for slippage. (Reference: &quot;Slippage&quot; refers to the difference between the expected price of a trade and the price at which the trade is executed)Under performanceMy research is contrary to [USER=50018]@Newt[/USER]&#039;s findings in-as-much that a portfolio with a smaller position sizing in their portfolio &#039;under perform&#039; whereas a 30-50 stocks in a portfolio for me is the “sweet spot” &amp; that is what I aim for. In saying this there is no ideal number of stocks you should own, that is for your research &amp; the strategy being traded.There are factors you should consider ‘First’, how actively do you want to manage your portfolio?‘Second’, you should decide how much risk you are willing to take &amp;‘Third’, this goes along with your risk to some extent, but you should consider if you are looking to be serious in this game as the quantity of positions in your portfolio can be a game changer.It doesn&#039;t matterThe maximum number really doesn&#039;t matter.If you&#039;re trading long-termBuy when &quot;you have all your ducks in a row&quot; &amp; sell when the stock goes &#039;stale&#039; (stagnates) or after the position has reached its peak, crested &amp; on the way down, it&#039;s not rocket science.Skate.</blockquote>

[QUOTE="Skate, post: 1039772, member: 57364"] Lifted from “[B]p2-asx-weekly-portfolio[/B]” thread. I've decided to make a post about "Portfolio position sizing", a current discussion in the “[B]p2-asx-weekly-portfolio[/B]” thread. [B]What a great post[/B] [USER=50018]@Newt[/USER] posted an "alternative view" about 'optimal portfolio position sizing' in the “[B]p2-asx-weekly-portfolio[/B]” thread relating to his own experience & research. Newt has put forth a compelling argument even posting an optimisation chart that corresponds to his views that differs from the actual results trading a 40 position portfolio. It's refreshing how Newt explained an alternative point of view in a respectful manner that others could understand. [B]My views[/B] All the posts I've made are written to pass on my experience I’ve gained over the years explaining that there is an alternative point of view or a different way of thinking about issues that may be beneficial to others, a little contrary to the accepted norm. [B]Psychological and behavioural reasons[/B] As [USER=13908]@peter2[/USER] eluded to in the “p2-asx-weekly-portfolio” thread - there are obvious “psychological and behavioural” reasons why a 30-stock portfolio is preferable to a 10-stock portfolio. There are fantastic risk/reward opportunities that you are willing to do at 3 per cent of your portfolio that you might be unwilling to do at 10 per cent. Historically it’s only a handful of stock that accounts for the bulk of market returns & having a 40 position portfolio gives you a fighting chance to find those handful of stocks that eliminates the risk of serious under performance. [B]Large enough to be meaningful[/B] A 40 position portfolio has a meaningful allocation or otherwise you risk missing out on significant market opportunities. Your portfolio has to large enough to have a meaningful position size in each. I’m not after sector performance but rather I'm after the top 40 stocks that make up the All ordinaries. Also trading a large account position sizing is critical for slippage. (Reference: "Slippage" refers to the difference between the expected price of a trade and the price at which the trade is executed) [B]Under performance[/B] My research is contrary to [USER=50018]@Newt[/USER]'s findings in-as-much that a portfolio with a smaller position sizing in their portfolio 'under perform' whereas a 30-50 stocks in a portfolio for me is the “sweet spot” & that is what I aim for. In saying this there is no ideal number of stocks you should own, that is for your research & the strategy being traded. [B]There are factors you should consider [/B] ‘First’, how actively do you want to manage your portfolio? ‘Second’, you should decide how much risk you are willing to take & ‘Third’, this goes along with your risk to some extent, but you should consider if you are looking to be serious in this game as the quantity of positions in your portfolio can be a game changer. [B]It doesn't matter[/B] The maximum number really doesn't matter. [B]If you're trading long-term[/B] Buy when "you have all your ducks in a row" & sell when the stock goes 'stale' (stagnates) or after the position has reached its peak, crested & on the way down, it's not rocket science. Skate. [/QUOTE]

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