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Hi Jim
Well maybe I'm confused but that is not at all out of the ordinary for
me. Your rule #2 states that you use no more than 3 to 5% of your total
portfolio value on any one position. Does that mean that you are never
fully invested since you only hold a maximum of ten positions? I don't
think so. If you initially open a position that is 10% of your portfolio
and it doubles it will of course become a larger percentage of your
portfolio. Do you have any guidelines that will not let one position
become too large a percentage of the portfolio? I've never seen you
scale out of a position or try to rebalance your portfolio. I've also
never seen you try to pyramid a winning position. If you have a really
large profit in one position in an industry group would you hesitate to
add a second position in the same group in order to hold your total
exposure to a group down?
For what it's worth I've tried several approaches to money management..
The rule I hold hard and fast to is to never open a position with more
than 5% of my trading capital, and many times it's less than that. I
don't scale into or out of positions either. I feel if I did my homework
and have good exits and stops that I should open the whole position at
once or not at all. I do however tend to have up to 40% of my portfolio
in a particular sector if I really think that sector will be moving. I
am basically a momentum player. I also have a speculative portfolio
which I define as funds that can be wiped out without any adverse effect
on my life style. Basically I trade options with these funds. Over the
last two years that's where I've had the most fun. It started out as 5%
of my portfolio and is now about 20%. Tomorrow it could be zero. But
what is life if not to have fun.
Cheers
John Manasco
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