Category Archives: Position Sizing

This One Tool Made the Difference Between Bankruptcy and $13 Million

The worst manufacturing numbers in a decade remind me of an old joke that’s made its way around financial circles over the years. It goes something like this:

An investment banker walks into a room where his cohorts are in a meeting. “I’ve got good news and bad news,” he announces. “The bad news is, we’ve just lost $100 million. The good news is, it wasn’t ours.” An associate raises his hand. “What was the bad news again?”

It’s humor, but there’s more than a grain of truth to the story. Whether we’re talking about brokers, bankers, or even your most trusted financial advisor, you cannot rely on anyone else to care about your money and keep it safe.

At the end of the day, the only thing standing between your portfolio and catastrophic loss is your own caution and proper risk management.

I know it’s not the most exciting part of investing. But there’s zero doubt in my mind it is the most important.

That’s why it’s part of the Total Wealth Strategy.

One tool called position sizing stands out above all others as the most powerful – and not just for cutting risk either, but for boosting your profits, too.

To see what I mean, consider this anecdote from trading psychologist Dr. Van Tharp:

“We’ve done many simulated games in which everyone gets the same trades. At the end of the simulation, 100 different people will have 100 different final equities. And after 50 trades, we’ve seen final equities that range from bankrupt to $13 million – yet everyone started with $100,000, and they all got the same trades. Position sizing and individual psychology were the only two factors involved – which shows just how important position sizing really is.”

Here’s how I recommend you start using it right now

Posted in: Position Sizing, Risk Management |

This One Tool Made the Difference Between Bankruptcy and $13 Million

There’s an old joke that’s made its way around financial circles over the years. It goes something like this:

An investment banker walks into a room where his cohorts are in a meeting. “I’ve got good news and bad news,” he announces. “The bad news is, we’ve just lost $100 million. The good news is, it wasn’t ours.” An associate raises his hand. “What was the bad news again?”

It’s humor, but there’s more than a grain of truth to the story. Whether we’re talking about brokers, bankers, or even your most trusted financial advisor, you cannot rely on anyone else to care about your money and keep it safe.

At the end of the day, the only thing standing between your portfolio and catastrophic loss is your own caution and proper risk management.

I know it’s not the most exciting part of investing. But there’s zero doubt in my mind it is the most important.

That’s why it’s part of my Total Wealth Strategy.

One tool called position sizing stands out above all others as the most powerful – and not just for cutting risk either, but for boosting your profits, too.

To see what I mean, consider this anecdote from trading psychologist Dr. Van Tharp:

“We’ve done many simulated games in which everyone gets the same trades. At the end of the simulation, 100 different people will have 100 different final equities. And after 50 trades, we’ve seen final equities that range from bankrupt to $13 million – yet everyone started with $100,000, and they all got the same trades. Position sizing and individual psychology were the only two factors involved – which shows just how important position sizing really is.”

Here’s how I recommend you start using it right now

Posted in: Position Sizing |