Investing term

What is Position sizing?

How much of your portfolio you put into a single pick.

Position sizing is the discipline of deciding how much money to put into each pick, matched to how strong your evidence is and how much loss you could absorb. It's where risk is truly controlled — more than which stocks you choose. Good investors are often right and wrong at similar rates; sizing is what makes the wins bigger than the losses.

For example

A high-conviction idea earns a 5% slot while a speculative one gets 1% — position sizing ensuring your best ideas, not your riskiest, drive returns.

Position sizing is taught hands-on in Stage 13 — Active Investing: Should You Even Bother?.

See the lesson →

Related terms

Active investingPicking individual stocks (or actively-managed funds) instead of just buying the index.CatalystThe event or condition that will close the valuation gap — and an estimated timeline.Circle of competenceThe set of industries, business models, and types of companies you actually understand well enough to evaluate.ConvictionHow strong your evidence is for a thesis — and therefore how much capital it earns.
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