Skip to main content
No. of Recommendations: 0

Thanks for your reply. It's great to hear your insights, especially after some time to test your ideas in the rising star portfolio.

In particular, I side with your belief that one should scale into a full target allocation, as the benefit of being basically right over time outweighs the risk of being precisely wrong with one large buy. If some new information comes along that dents your thesis before reaching a full position, then you can hold off futher buys. The risk of large buys might work if you "trade into" a (hopefully) long-term position with a mental stop-loss in mind. I'm not inclined to cut my losses in any mechanical way, since I'm most likely to add to the position, unless a material event has shaken my resolve.

I'd like to hear more about how you decided on a max position size of a position that has appreciated to 10-12% of the portfolio. My question is: Isn't overvaluation the main risk with this position size, and not purely concentration? For example, if the stock has stayed below fair value, but has appreciated in line with significant value-creation, why not continue to let it run?

Anyway, I really appreciate your previous reply, and eagerly look forward to following this board.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.