Maximum single position size

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?

What is your maximum single position size ?

less than 1 %
0
No votes
1 to 5 %
22
35%
6 to 10%
18
29%
11 to 20%
10
16%
20%+
8
13%
I don't have one
5
8%
I measure it in $, not %
0
No votes
 
Total votes: 63

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Koogie
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Maximum single position size

Post by Koogie » 29 Oct 2016 22:15

I realize this question comes up a lot in various threads but I couldn't find a single thread dedicated to the question. Apologies if there is one.

There was a question recently on a different forum asking people to name their single largest position. It made me realize that thanks to the recent market run up that one of my single stocks had risen to more than 5% of my portfolio. I now have a hard decision to make about whether or not my investing rules are ironclad and I trim it or if I let it run. As a "buy and mold" investor I am more inclined by my nature to let it run but "rules is rules"

I also have two etfs that are now more than 5% of my portfolio. Are you inclined to view positions in etfs/funds differently than you do individual stock positions ? ie: do you feel comfortable having a larger % tied up in a diversified index than in a single corporation ?

On the other hand, some of our posters are quite wealthy ( :thumbsup: ). Instead of a percentage of assets do those investors instead have a hard $ cap on a single position ?

So, just interested to see what other peoples rules are concerning individual position sizes. Do you limit it to a certain % and/or $ of your portfolio and are you diligent about maintaining that ?
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Re: Maximum single position size

Post by longinvest » 29 Oct 2016 22:35

I've got 50% in VAB. Is that a single position or 751 positions? If the latter, that would result into the largest bond position of:
50% X 1.85% = 0.92% Canadian Government bond 3.75% June 1st, 2019

In that case, I guess that I would have a larger stock position due to my 25% allocation to VCN:
25% X 6.66% = 1.66% Royal Bank of Canada

So, there you have it. It's either 50% or 1.66%.

In total, I have either 3 positions or 9388 positions. I prefer to think that I have the bigger number of positions. :wink:
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Re: Maximum single position size

Post by DenisD » 29 Oct 2016 22:59

I think of asset class targets rather than position sizes or percentages. Each asset class can contain an ETF or, in the case of stock screens, 8 to 20 companies. Generally, when I refresh a screen, the stocks are equally weighted. But each of 8 REITs in the REIT screen is worth about five times as much as each of 20 US small-cap stocks in the US small-cap screen.

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Re: Maximum single position size

Post by peter » 30 Oct 2016 01:25

ETFs aren't single positions. I have individual REITS and Canadian stocks, largest are 3% of stock total. For REITs this might be getting a bit big but there aren't that many decent sized ones. For stocks 3% is for GIL and TCK.B, both up several times and both are at least twice as large as average. Not sure what I'll do with this. Largest positions by far are VTI and VEA but that doesn't matter.

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Re: Maximum single position size

Post by Davis » 30 Oct 2016 06:15

I hold only individual stocks and REITs, and keep a 10% max on any holding, which means I have about 15 companies. If I had a single ETF fit my entire portfolio, I would have way more divesification. Imposing constraints on ETF/mut fund holdings seems unnecessary.
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Re: Maximum single position size

Post by SQRT » 30 Oct 2016 11:07

I have two banks that dominate my portfolio. One is about 20% and the other even more. I have been chipping away at the largest position and have reduced it somewhat. ACB is very low so to be more diversified will cost a fair bit of tax. In total I have about 12 individual names. Most of you guys would be very uncomfortable with my portfolio, but I am only moderately uncomfortable. Not enough to do anything drastic at this point. I'm so far ahead of the TSX performance at this point I could take a very large hit and still be even.

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Re: Maximum single position size

Post by Shakespeare » 30 Oct 2016 11:14

I don't think my largest position (VT, 20% of total portfolio) should count as a "single position". The 2021 RRB, 17%, does.

My largest stock positions are about 3% of total portfolio each - TD, BNS, FTS, T, RY. But my portfolio looks nothing like the TSX composite.
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Re: Maximum single position size

Post by deaddog » 30 Oct 2016 12:21

I let the stocks performance determine position size.

Why would you want to sell a stock that continues to perform well? Of course as soon as a stock doesn't perform well it is replaced.

My largest position is BYD.un which I opened in the spring of 2009. (22% of a 14 stock portfolio)
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Re: Maximum single position size

Post by j831robert » 30 Oct 2016 13:01

I hold one Cdn Bank's common stocks (purchased in 1985 and subsequently split twice) which represents about 17% market value of my (not counting HISAs) investments with disposal only considered as part of a plan to reduce if/when my wife dies before me and I "bite the capital gains bullet, gift the proceeds to my children and reduce my own income to a point where I get to retain all of my OAP.

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Re: Maximum single position size

Post by schmuck » 30 Oct 2016 15:34

deaddog wrote:I let the stocks performance determine position size.

Why would you want to sell a stock that continues to perform well? Of course as soon as a stock doesn't perform well it is replaced.

My largest position is BYD.un which I opened in the spring of 2009. (22% of a 14 stock portfolio)
Stocks like BYD.UN and PBH have also become some of my largest holdings by their stellar performance. That's all great, but I don't think I'm quite as comfy with that as you are as they are not exactly in the widows and orphans camp. Nor am I all that confident about any stocks' continued performance. That said, I have trimmed PBH a bit after a big spike, only to watch go even higher after a short lull. :(
I try not to be a diversification freak, but it does become somewhat more prudent for investors who are portfolio dependent, without the benefits of employment income, pensions, or a variety of other assets.

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Re: Maximum single position size

Post by StuBee » 30 Oct 2016 16:17

Royal bank at 10%. ENB, BCE, EFA are all between 6 and 10%.
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Re: Maximum single position size

Post by ghariton » 30 Oct 2016 18:18

The 2021 RRB at 35% of the portfolio.

Everything else is in equity ETFs. Looking through the ETFs, my single biggest holding appears to be Apple, somewhere between 1% and 2%.

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Re: Maximum single position size

Post by kumquat » 30 Oct 2016 19:32

There was a time when my options in former employer's stock were about 80% of my net worth (not just investments). I was somewhat uncomfortable and started selling. By the same token, I was wondering how big this bubble could get. Turns out, I lucked out. I got about 70% of selling at the top, but > 500% of selling when at some arbitrary percentage of holdings.

YMMV.
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Re: Maximum single position size

Post by Peculiar_Investor » 31 Oct 2016 10:21

I've previously posted that our investment policy statement recommends an individual stock position should be reviewed when it hits 5% of the portfolio. More often than not, a review of my valuation of the company indicates that trimming the position back to under 5% is the best course of action to maintain our desired portfolio diversification.

Holdings in ETFs are exempt from this process/criteria as they are used in markets where I don't have an expertise in stock picking and therefore I'm buying the broad based index for the asset class to achieve diversification, i.e. international.

Our investment policy statement sets a target of individual stock holdings between 30-35 names in the Canadian and US equities asset classes, which suggests that a "normal" position size is around 3%.
Shakespeare wrote:But my portfolio looks nothing like the TSX composite.
Nor does mine. Current top 5 individual holdings are: ATD.b; BNS; SJ; MRU and SYK (US). GIL would be the fifth Canadian only holding. Interesting to compare the current list with what's posted in What are your top holdings (at start of 2013)? and What are your top 5 holdings?
deaddog wrote:Why would you want to sell a stock that continues to perform well?
Diversification and risk control is why I set our IPS review limit at 5%.
kumquat wrote:There was a time when my options in former employer's stock were about 80% of my net worth (not just investments). I was somewhat uncomfortable and started selling.
Been there, done that although not quite to that extent. During the tech boom both my spouse and I were in the tech sector and had significant holdings, via stock options and employee stock plans, in our employer's stocks. We recognized the significant risk of having our jobs and investments tied to one booming sector and therefore were opportunistic sellers when our plans allowed, moving the proceeds into other sectors to gain diversification. Because there were also tax factors involved, we also allowed things to reach the "uncomfortable" level. I consider it a lesson learned.

Of course that was before I found FWF (and predecessors) and learned about the importance of having an investment policy statement to document and guide the decision process. Making mistakes is part of the Financial Education process. The key part is learn something from your, or other's mistakes so that you don't repeat the mistake. Sorta like "Fool me once, shame on you ... fool me twice, shame on me". You need to be comfortable with your investment style and choices, but if you never take any risk you'll never see any reward. The challenge is to take on the risk that is acceptable for your situation. From my point of view, setting a maximum single position size is part of this process.
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Re: Maximum single position size

Post by deaddog » 31 Oct 2016 11:59

Peculiar_Investor wrote:
deaddog wrote:Why would you want to sell a stock that continues to perform well?
Diversification and risk control is why I set our IPS review limit at 5%.
Diversification causes you to limit your best performers.

The best way to manage risk is to limit losses.
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Re: Maximum single position size

Post by SQRT » 31 Oct 2016 13:45

deaddog wrote:
Peculiar_Investor wrote:
deaddog wrote:Why would you want to sell a stock that continues to perform well?
Diversification and risk control is why I set our IPS review limit at 5%.
Diversification causes you to limit your best performers.
So you got me thinking. When I retired 10 years ago my portfolio was totally in my employer's (big bank) stock. Since then I have been diversifying into other well established div payers. Over this period my portfolio has out performed the TSX by a wide margin. But I went back and calculated the results if I had just stayed in the one stock. My portfolio would be ahead by about 20% today if I had. Not sorry I diversified, but still.

Not every big company is an Enron or Nortel. The tough part is knowing which ones are which. The funny part was I was almost certain my employer was solid and was in a position to know this.
Last edited by SQRT on 02 Nov 2016 10:29, edited 1 time in total.

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Re: Maximum single position size

Post by gsp_ » 31 Oct 2016 14:36

SQRT wrote:Not every big company is an Enron or Nortel. The tough part is knowing which ones are which. The funny part was I was almost certain my employer was solid.
As were many Enron and Nortel employees.

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Re: Maximum single position size

Post by FinEcon » 31 Oct 2016 15:53

As an investor, reading that other investors have an IPS gives me IBS. I don't believe in arbitrary hard caps for position size but prefer to take a holistic view and have no problem with a portfolio that is barbell weighted. At the moment I'm pretty well diversified with maybe a dozen and a half holdings, all Canadian equities, some big, some small. Biggest equity holding is somewhere around 20%. My current holdings are super low risk right now although many of you would disagree with my idea of what constitutes low risk.

Concrete example of why cutting your winners is not a good idea: I could have made a high double digit return on Boyd $70 ago. It will not grow like it has in the last 5 yrs or so in the next 5. Growth will be good but doubling in size gets harder and harder but who knows, they could be the next Couche Tard.
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Re: Maximum single position size

Post by planB » 31 Oct 2016 16:30

Another indexer here -- my biggest holding is an RRB. I wish I had bought more in 2009, when real yields were a dissappointing 2.3% :shock:

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Re: Maximum single position size

Post by SQRT » 31 Oct 2016 17:51

gsp_ wrote:
SQRT wrote:Not every big company is an Enron or Nortel. The tough part is knowing which ones are which. The funny part was I was almost certain my employer was solid.
As were many Enron and Nortel employees.
Yes, I understand. I wonder if Andy Fastow thought Enron was solid. I wasn't doing the funny stuff that Fastow was doing.

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Re: Maximum single position size

Post by Hammerer » 07 Nov 2016 01:31

Teck's runup is making it take up ~1/3rd of my TFSA and 10% of my total portfolio. I'll be trimming it, but probably still going to keep half. Fort Hills appeals to me.

RSP is almost entirely in VTI. I'm not sure if that counts as a "single position", but if Vanguard sneezes, I'm in trouble.

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Re: Maximum single position size

Post by Profit not Prophet » 06 Sep 2017 13:12

The banks and cnr are down a little bit relative to the rest of the market these past few months. So I've been rereading the thread to get a sense of what if anything I might do about it. The trade off is there concentrate or diversify. Comes down to what percent is your percentage depending on your personal situation. I guess your situation changes over time. Funny thing this making money isn't it.

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Re: Maximum single position size

Post by kiwidog » 13 Sep 2017 12:48

Biggest single position BRK.b. Some call BRK a mutual fund that is far from the true, but it does have adequate diversification plus control of most of the companies they own and the liability of $100 billion in cash.
Some owned for the last 20 plus years since the B's became available (1996) Bought some at various time when the price was significantly below the intrinsic value. Makes up slightly less than 35% of total investment portfolio. Unconcerned with the "oversize" ; other positions make up 10% and 12% of the portfolio RY and NA
I know some will cringe at the thought but that is what makes market's.

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Re: Maximum single position size

Post by AltaRed » 13 Sep 2017 13:03

With broad market index ETFs/mutual funds, I agree they are diversification in their own right. In my opinion, BRK.b doesn't really qualify because it is an actively managed business by 1-2 people. They can f*ck up. I'd consider it just like POW (holding company) or BAM.A (Brookfield) or FFX (Fairfax).
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Re: Maximum single position size

Post by 2of3aintbad » 14 Sep 2017 07:57

ghariton wrote:
30 Oct 2016 18:18
The 2021 RRB at 35% of the portfolio.

Everything else is in equity ETFs. Looking through the ETFs, my single biggest holding appears to be Apple, somewhere between 1% and 2%.

George
When I bought the 2021 RRB, the maturity date seemed like such a long time in the future. Now it is less than 5 years from maturity. Just curious, do you hold other RRBs (ie with other maturities)?

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