Position Sizing: How Much of Your Portfolio Should One Stock Be?

Even a genuinely great company deserves a size limit in your portfolio — because 'great' and 'risk-free' are never the same claim. Position sizing is simply the decision of how much of your total portfolio to put into any one investment. The bigger the position, the bigger the impact — for better or worse — of that single company's outcome on your overall wealth.

Some investors set a personal cap (say, no single stock above 5-10%) precisely to remove the temptation to over-concentrate on whatever they're most excited about right now.