I couldn’t agree more. Strong conviction has its limits. I suspect you are in the same category as many here. Wealth preservation is primary. Capital appreciation is secondary.
At what point does this factor into asset allocations to individual ideas?
The counterpoint to your argument is that your increased allocation is not only related to your CONFIDENCE in any idea, but also your ATTENTION to micro changes to the theme (thesis).
For context, we have the hypergrowth investors here who only have 6-12 ideas for the entire portfolio. Since those investors only speak to that framework through ideas and allocations, we don’t see the invisible proportion of their ideas to their REAL ENTIRE portfolio.
For example, an allocation to NBIS was recently discussed at length here:
(post #4 for the first example - almost 20%!)
But the challenge is, 20%…. of how much in total? Perhaps its truly 4% or maybe even 7%? For a young investor, I suspect it could be truly 20%!
These investors have both conviction AND attention; information flows impact their point of view on a very frequent basis.
So, I ask again:
How much does capital appreciation factor into your portfolio management?
I recently shifted a SIGNIFICANT proportion of my growth ideas to capital preservation. In doing so, I’ve missed out on 2% appreciation on my entire portfolio in just a week.
But, I’ve mitigated a significant alternate risk of exposure to black swan or company specific issues.
My growth portfolio was reduced to less than 60% of it’s prior size. The shift came as funds have been moved to stable income opportunities (cash and equivalents).
I am building that side of my portfolio now.
To continue rambling, I ALSO increased my WFC/L proportion to 4.5% of my portfolio. company risk still exists here, but without the growth proposition. That position represents ~10% of my preservation portfolio.
There are so many moving parts here.