Principle 04 of 06
Size by conviction, cap by risk
How much you own matters as much as what you own.
The idea
Two investors can own exactly the same stocks and get very different results, simply because they sized their positions differently. Position sizing is where conviction meets risk management.
My approach is simple: the ideas I understand best and believe in most get the most capital - but every position has a ceiling, so no single mistake can do serious damage to the whole portfolio.
Why it matters
Concentration is how meaningful returns are made; diversification is how you survive being wrong. Sizing by conviction while capping by risk gets the benefit of both.
How I applied it
Across the four-year journey
2022
Set a maximum weight for any one holding and any one theme before buying anything.
2023
Let my highest-conviction compute positions grow larger - but within those limits.
2024
Trimmed positions that had grown past their caps purely through price gains.
2026
Kept speculative ideas, like robotics, small - enough to matter if they work, not enough to hurt if they don’t.
In practice
My working rules
- ✓Decide position limits in advance, when you’re calm - not in the heat of the moment.
- ✓Rank ideas by conviction, and let that ranking drive size.
- ✓Small ‘starter’ positions are fine for new ideas; grow them as evidence builds.
- ✓Think in themes as well as stocks - five companies exposed to the same risk are really one big bet.
Watch out
The trap: winners quietly become too big
A great stock can double and double again until it dominates your portfolio without you ever deciding that. Regular checks against your caps stop success from turning into fragility.
Key takeaway
“Bet big on what you know best - but never so big that one mistake can end the game.”