Portfolio management sample

Here’s some portfolio management principles and a simple trading strategy. Courtesy of Willem Faul, our Head of Private Clients.

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Position size

  1. Your total exposure should never be more than 2x your capital amount.
  2. Your total exposure should never be more than 3x your capital amount [with shorts].
  3. Your total exposure to one share should never be more than 1x your capital amount.

Buying strategy

  1. Start by buying only half of your planned position; see how easy it is to get the stock.
  2. If it moves in your direction buy the rest, but if it moves against you, stop buying.
  3. And allocate the stock you have already bought.

Protection via stop loss

  1. Why take a stop loss: to protect yourself from wipe-out; and to get the stock cheaper.
  2. When to take a stop loss:
  3. When there is a 3 ½ % move against you
  4. When it breaks the support line
  5. When you start to feel uncomfortable.

Position management

  1. Anyone can make good calls, but that doesn’t mean success.
  2. It depends on how you manage the position.
  3. Let the profits run: don’t think total profits, think price and %.
  4. Take the trades you see, take the stops where needed, and don’t overexpose yourself.

Ignore outside opinions

  1. This is your strategy and your performance.
  2. Don’t get confused by what others say, ignore outside opinions.
  3. It is your money: you decide — if you are not the one making the decisions then you might as well let someone else trade for you.

Know what you trade

  1. Trade only the liquid stocks: where you can get out quickly if you need to.
  2. Trade only the low risk stocks: where you do not take unnecessary chances.
  3. Trust the fundamentals: know the business, know the company, read.

Understand the market

  1. When you are right: let it run, then take your profit.
  2. When you are wrong: then you must learn from it.
  3. When you don’t understand: stop, consolidate, ask, read, find out.
  4. No share owes you money, take your loss, move on, don’t try to get back at it.

 

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