Every investor aims to make money in stock market. New investor hopes to make big profit and strike a fortune. Seasoned investors are more realistic, satisfied with lower but more sustainable returns.
All possible profit start with the purchase of shares, unless if you are shorting the market. Hence the first step of buying, is usually crucial.
Most people would focus much on what share to buy, and when to buy. What about how much funds should a person invest into one share? I believe this is seldom considered.
Here I would like to share some principles to help you in this area.
It’s All About Position Sizing
According to Investopedia, position sizing is
‘refers to the number of units invested in a particular security by an investor/trader. An investor’s account size should be taken into account when determining position sizing’
In a portfolio where each stock constitutes 20%