Position Sizing

Oct 13, 2021 07:35 PM 0 Answers
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Hi Marty,


You mentioned in your report trading 100 shares of AFRM to test the water. Is  that recommendation based a medium to large account size (> $10 000)? If you account is smaller, say < $ 10 000, would you still recommend trading 100 shares as that position's exposure could be leveraged more than 1x account size, in a choppy market. Maybe you could give some general guidance on position sizing?


Thanks for the service



Thank you for your kind words.  I have a post with position sizing but it is lost in the archives somewhere. Your age has a great deal to do with how aggressive to be in the stock market. I am 64 years old, and 80% invested is fully invested for me. I cannot be as aggressive as people in their mid-20's. If you are under 40 years of age then you need to be really aggressive in order to maximize your gains in the stock market.

In general, a portfolio should hold a full position (10% - 12.5%) of 8-10 stocks in an up trending market. We have been correction so the percentage would be reduced. No individual investor needs to own more than 10-12 stocks. It becomes too much to keep track of after awhile, and we tend to lose focus on some of our stocks.

You asked specifically about AFRM, and I did recommend people to "test the waters" if they are getting "frustrated" or "tired" of following this market. If you have $10,000 in your account then you are likely going to own only 3-4 stocks at the  maximum in your portfolio.  I would suggest investing in 25 shares of AFRM.  If the stock trades higher (as it did today) then you have an option to hold or add to your position or take profits.  It is nice to have some options in this game.

I believe AFRM is going to trade much higher in the future. That is not because I like the stock. It is because the large institutions are buying the stock evidenced by the big blue volume bars on the daily/weekly charts.

Those are institutional footprints, and they do not buy all at once. Maybe it pulls back in the next few sessions, and you get a better price? But, if it trades at $200 soon will it matter if you bought at $147 or $144?

I hope I answered your question regarding sizing and AFRM





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