Position Sizing & Concentration

Grieve: Kelly Criterion limitations lead to 10x10 portfolio approach

Kyle Grieve

“The Kelly Criterion, while mathematically sound for repeated bets with known odds (like gambling), breaks down for value investing where opportunities are sparse and infrequent. Instead of applying Kelly directly, a practical approach for value investors is the "10x10" method: maintaining roughly 10 positions at approximately 10% concentration each, providing meaningful conviction while avoiding catastrophic risk from any single bet.”

Gilbert/Rosenthal: Conviction equals overconfidence; diversification maximizes probability of getting lucky

Ben Gilbert & David Rosenthal

“Conviction in investing is actually overconfidence—believing your view of the future is superior due to sunk cost and bias from extensive work. Rather than concentrating capital based on conviction, investors should construct portfolios with 30-40 positions to maximize the probability of getting lucky, as venture portfolios with only 5-10 positions are non-resilient.”

Lamont: Concentrated portfolios don't empirically outperform despite theoretical appeal

Owen Lamont

“While research shows that portfolio managers' best ideas (their top 3 holdings) tend to outperform, this doesn't mean investors should hire managers who only hold 3 stocks. Empirically, extremely concentrated managers don't actually outperform; they're more likely just lucky rather than skilled. The myth that concentrated managers demonstrate conviction while diversified managers are "closet indexers" is simply false.”

Greenig: Diversification reduces position concentration risk

Doug Greenig

“Trading across many diverse and esoteric markets enables smaller position sizes in each market, which reduces the impact of individual market failures or "headaches" like the LME fiasco. This approach parallels angel investing, where spreading capital across hundreds of opportunities rather than just 5-10 increases the probability of capturing big winners while limiting concentration risk in any single position.”

Gerstner: Concentration required for venture returns

Brad Gerstner

“Venture portfolios must be concentrated enough that individual deals can return the entire fund, as over-diversification leads to merely average returns. Since the top 10-15% of venture investments generate 80-90% of returns, attempting to capture average vintage returns through broad diversification is an asset-gathering game rather than a value-creation strategy.”

Grieve: Bolton's position sizing from 0.25% starters to 2-4% conviction holds

Kyle Grieve

“Anthony Bolton started positions at very small sizes (25 basis points or 0.25%) and would scale up to 2-4% concentration based on improving conviction levels. His allocation strategy varied with market conditions: during bull markets he tended to build up holdings and increase position sizes (possibly due to FOMO), while in bear markets he consolidated and pruned the portfolio.”

Lamont: Concentrated portfolios face institutional skepticism unless framed as activism

Owen Lamont

“Institutional investors are typically reluctant to back managers who hold extremely concentrated portfolios (e.g., five stocks) based purely on stock-picking, viewing this as risky. However, these same institutions become more receptive when concentration is justified through activism, because they understand the difficult nature of activist investing. This creates a paradoxical situation where managers may need to position themselves as activists to gain institutional backing for concentrated positions.”

Nomad Investment Partnership's Inactive Strategy for Market-Beating Returns! w/ Kyle Grieve (TIP664)

Kyle Grieve

“…transition here and chat briefly about how Nomad approaches position sizing and diversification like many hyper performing money managers they were concentrated in just a few positions the rational cloner noted they averaged around 10 positions so they were qu”

Owning Best-in-Class Businesses w/ Joseph Shaposhnik | Rainwater Equity's Launch (TIP731)

Joseph Shaposhnik

“…ned 20 holdings in the funds and it looks like your typical position has a four to 5% waiting. Some a few of them are a few a little bit higher than that. How about you talk through how you went about determining portfolio sizing of positions? Well, the sizing”

10 Things I Learned About Investing w/ Stig Brodersen (TIP668)

Stig Brodersen

“…folio and that takes me to the next point point number nine position sizing this is one of the things I've changed my mind on the most over my investing career and I don't expect to have it completely nailed down today that being said after trying and failing”

Stock Market Maestros: How Top Fund Managers Beat the Market w/ Kyle Grieve (TIP805)

Kyle Grieve

“The other area of the strategy worth mentioning is initial position sizing. So his standard position size is about 80 basis points, so pretty small. Now, let's move on here and talk about one of John's winning investments. We're going to look at a business cal”

You can be a Stock Market Genius w/ Roger Fan | Greenblatt's 30%+ Returns (TIP677)

Roger Fan

“…15 or 20% and generally you know we all really like having positions be more than you know 20 or 25% at Cost but uh I'm willing to do it right if absolutely um if the downside is absolutely protected haven't done 40% position like Joel green blad did but uh p”

Mohnish Pabrai: Berkshire, Big Mistakes & Letting Winners Run (TIP812)

Mohnish Pabrai

“…ing the 50 stocks and you you need to hold on and it's a 2% position. I'm probably the only one of your investors in Pabrai Funds who wants you to be more concentrated. Because I have this this bias where I feel the highest conviction ideas and that what you'r”

The Mindset and Skills That Build Investing Legends w/ Ian Cassel (TIP732)

Ian Cassel

“…is kind of sizing your conviction and that can mean initial position sizing. That can be averaging up, averaging down. And I think position sizing is incredibly important since I think the greatest attribute of public markets investing when compared to private”

Top Investment Lessons & Takeaways of 2024 w/ Clay Finck & Kyle Grieve (TIP685)

Clay Finck

“…e of uncertainty is probably most valuable when determining position sizing so let's say that you take a starter position in a business that you feel has many of the characteristics that Buffett just covered you start a small let's say you know 2 3% you own th”