Most investors spend 95% of their time working out WHAT to buy and 5% deciding HOW MUCH. It should be the other way round: you rarely survive a bad idea that is oversized, whereas you always survive a bad idea that is correctly sized.
The risk-per-position rule
Professional managers rarely think “I will put in €10,000”. They think in risk: “I will not accept losing more than 1% to 2% of my total capital on this idea”. The size of the position then follows from how far away you would place your loss threshold.
Example: €50,000 of capital, 1% risk accepted (€500), stop 10% away → a €5,000 position.
The concentration trap
Concentration made the fortune of a few great investors, and ruined thousands of others we never hear about (survivorship bias). Betting 40% of your wealth on one conviction is betting that you are not wrong. Nobody can guarantee that.
Ruin is irreversible
An investor who loses 100% is out of the game, whatever the quality of their future ideas. The first rule is not to win: it is to stay in play. No conviction justifies a risk of ruin.
Size on conviction AND risk
A strong conviction can justify a larger position, but within a range set in advance (say 2% to 8% of the portfolio). Set those bounds while calm, never in the excitement of an idea.
À retenir
- ✓HOW MUCH matters more than WHAT: you survive a well-sized mistake.
- ✓Think in accepted risk (1–2% of capital per idea), not in amount invested.
- ✓Rule number one is never to risk ruin: it is irreversible.