Regarding allocation in a particular portfolio, there is an endless debate. There is no holy grail.
Allocation style depends upon an individual’s comfort levels. I have a close friend, ( don’t want to name him) who is scared to go beyond 10-12% allocation in his highest conviction bets. For me it is often the minimum starting position in my highest conviction bets. And both of us have near identical records.
But there are certain situations where there is confirmation of a good story from multiple vantage points. For someone like me, having knowledge of technicals also is an added advantage. If I find a good company with improving fundamentals crossing key 52 week, or multi year high levels, I feel added conviction and find it easy to increase allocations.
I know of some investor friends, who dig deep into fundamentals ( not my forte), often attend management concalls, AGMs, have a close eye on the industry scenario, track competitors etc, and they too have their own ways of getting added parameters in a high conviction story. I know for a fact that they do not indulge in chart reading. But they have found and sharpened their own methods of getting conviction, and tracking company on a regular basis.
I am not good at statistical models, I am more of a feel based investor, more intuitive, more instinctive, when it comes to allocation part in my portfolio. So I would have no answers to the different scenarios you have put up. You will have to make your own peace with those problems with experience and trial and error.
But highly concentrated positions have often worked for me. The most important attribute for a concentrated investor is to be nimble and decisive. If any of my high concentration bets seem to be on shaky grounds, I am very quick and decisive in reducing/totally exiting my positions. Post this actions, even if my call has gone wrong, in cutting my positions, I don’t suffer from any regrets.
| Subscribe To Our Free Newsletter |
