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

User avatar
ghariton
Diamond Ring
Diamond Ring
Posts: 11783
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: Maximum single position size

Post by ghariton » 14 Sep 2017 13:10

2of3aintbad wrote:
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)?
I used to own a ladder of RRBs. But a few years ago I thought that (real) interest rates had dropped as low as they were likely to go, and if anything were likely to rise. So I reduced the duration. I moved all my RRBs to the 2021, currently with duration slightly under 4.

George
The plural of anecdote is NOT data.

2of3aintbad
Bronze Ring
Bronze Ring
Posts: 64
Joined: 04 Jan 2016 10:55

Re: Maximum single position size

Post by 2of3aintbad » 14 Sep 2017 13:44

ghariton wrote:
14 Sep 2017 13:10
...
I used to own a ladder of RRBs. But a few years ago I thought that (real) interest rates had dropped as low as they were likely to go, and if anything were likely to rise. So I reduced the duration. I moved all my RRBs to the 2021, currently with duration slightly under 4.

George
OK, I understand. However, it is not clear to me how the RRB will be perform into maturity, as there 2 components - the original 4.25% and the inflation adjustment. Assuming the inflation adjustment will be small, I am concerned about a drop in market value as the premium disappears.

User avatar
ghariton
Diamond Ring
Diamond Ring
Posts: 11783
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: Maximum single position size

Post by ghariton » 14 Sep 2017 16:12

2of3aintbad wrote:
14 Sep 2017 13:44
However, it is not clear to me how the RRB will be perform into maturity, as there 2 components - the original 4.25% and the inflation adjustment. Assuming the inflation adjustment will be small, I am concerned about a drop in market value as the premium disappears.
The size of the premium has been dropping for some years now, as we get closer to maturity. The coupon yield, as a percentage of market value, is around 3 per cent, while the real yield is less than 1 per cent. The difference is essentially return of capital.

At maturity, I expect to receive the face value, adjusted upward for inflation (currently face plus some 60 per cent). The premium will have completely been paid out via coupons, and unfortunately I can't get it paid to me twice.

George
The plural of anecdote is NOT data.

User avatar
Wallace
Gold Ring
Gold Ring
Posts: 2052
Joined: 30 Nov 2005 19:05
Location: Waterloo Ont

Re: Maximum single position size

Post by Wallace » 14 Sep 2017 16:28

Maximum position just under 10%. At any one time I have between 12 and 14 stocks, roughly equal weighting but I don't re-balance. Four - TRP, RY, MGA, AAPL are not sheltered in RRSP or TFSA. I've held them for a long time and use the last two on the USA side to finance trips to USA. All my stocks are dividend producers.
Freedom!
"The trouble with internet quotes is that you never know if they are genuine" - Abraham Lincoln
Auto-correct is now my #1 enema

2of3aintbad
Bronze Ring
Bronze Ring
Posts: 64
Joined: 04 Jan 2016 10:55

Re: Maximum single position size

Post by 2of3aintbad » 14 Sep 2017 17:02

ghariton wrote:
14 Sep 2017 16:12
2of3aintbad wrote:
14 Sep 2017 13:44
However, it is not clear to me how the RRB will be perform into maturity, as there 2 components - the original 4.25% and the inflation adjustment. Assuming the inflation adjustment will be small, I am concerned about a drop in market value as the premium disappears.
The size of the premium has been dropping for some years now, as we get closer to maturity. The coupon yield, as a percentage of market value, is around 3 per cent, while the real yield is less than 1 per cent. The difference is essentially return of capital.

At maturity, I expect to receive the face value, adjusted upward for inflation (currently face plus some 60 per cent). The premium will have completely been paid out via coupons, and unfortunately I can't get it paid to me twice.

George
Yes, that was well said. Thanks.

User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20647
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Maximum single position size

Post by Shakespeare » 14 Sep 2017 18:36

Maximum position VT, 21.3% of portfolio. Stocks all less than 3.4% (TD). 2021 RRB 16%.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18082
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Maximum single position size

Post by AltaRed » 14 Sep 2017 19:28

Not counting ETFs, largest stock holding at this time is 3.0%
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

BRIAN5000
Gold Ring
Gold Ring
Posts: 5819
Joined: 08 Jun 2007 23:27

Re: Maximum single position size

Post by BRIAN5000 » 14 Sep 2017 19:59

I'm living on the edge with ZPR at 3.9% then BNS at 3.76% Core positions are mostly between 3 - 3.76%ish.

I assume you are both quoting only the equity side of your portfolio. Once you include fixed income 3.9% drops to 1.6% of total portfolio for myself.
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18082
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Maximum single position size

Post by AltaRed » 14 Sep 2017 20:03

I am quoting percentages based on 100% of the portfolio... excluding a few extraneous bank accounts. I see no point having anything* less than 2% unless I am in the process of building a position.

* Not quite true. My fixed rate reset prefs are in the 1-1.5% range to have a 5 year ladder and still keep total prefs below 10% (about 7% or so) allocation. Additionally, my bond/debenture/GIC ladder in my RRSP has similar small sized holdings to hold about 10-12 entries on a 6 year ladder. Truth be known......I find managing small positions to be a bit irritating/nuisance.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

OnlyMyOpinion
Silver Ring
Silver Ring
Posts: 642
Joined: 24 Jan 2014 23:17

Re: Maximum single position size

Post by OnlyMyOpinion » 15 Sep 2017 05:55

BRIAN5000 wrote:
14 Sep 2017 19:59
...
I assume you are both quoting only the equity side of your portfolio. Once you include fixed income 3.9% drops to 1.6% of total portfolio for myself.
You raise a good point. I consider my exposure to company x as a percentage of my total assets. The percentages are pretty small.
But I also look at the individual equities portion of my portfolio in isolation to review weightings in the market. Also, what % of our dividend income is represented by each company.
This subset of assets is effectively 'paying the bills' so I like to consider it more closely.
Well-performing companies do sometimes become a larger percentage than I'm comfortable with, even though still a small percentage of total assets.

longinvest
Gold Ring
Gold Ring
Posts: 1374
Joined: 10 Sep 2012 17:26
Location: QC

Re: Maximum single position size

Post by longinvest » 15 Sep 2017 07:16

My portfolio contains ( 220 + 10,177 + 800 + 8 ) = 11,205 securities held through four index ETFs ( VCN + VXC + VAB + ZRR ).

My biggest security holding is the Government of Canada real-return (4% coupon) bond maturing on December 1st, 2031. It represents 4.2% of my portfolio. My biggest stock holding is the Royal Bank of Canada (RY) which represents 1.8% of my portfolio.
Bogleheads investment philosophy | Simple index portfolios | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VAB/ZRR

ockham
Gold Ring
Gold Ring
Posts: 1426
Joined: 04 Apr 2006 21:50
Location: The Prairies

Re: Maximum single position size

Post by ockham » 15 Sep 2017 09:53

For the purposes of this calculation, do folks aggregate fixed income and equity exposures to the same entity?? Or aggregate exposures through individual holdings and fund holdings??

For example, I might hold TD commons, prefs, and corporates. Is the proper measure of my TD exposure = commons + prefs + corporates?? On top of that, I might hold TD in an equity fund and/or in a bond fund and/or in a pref fund.

User avatar
deaddog
Gold Ring
Gold Ring
Posts: 2550
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: Maximum single position size

Post by deaddog » 15 Sep 2017 10:06

I hold 29 positions, no funds, no ETFs.

Top 10 holdings make up 50%

Top 2 holdings Make up 25% (There has been no reason to sell these stocks)

Capital preservation is #1 priority.

I control risk by trading in and out of the market.
Most of our so-called reasoning consists of finding arguments for going on believing as we already do.( J.H. Robinson)

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18082
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Maximum single position size

Post by AltaRed » 15 Sep 2017 10:43

ockham wrote:
15 Sep 2017 09:53
For the purposes of this calculation, do folks aggregate fixed income and equity exposures to the same entity?? Or aggregate exposures through individual holdings and fund holdings??
I don't add them up explicitly but subconsciously I do. I have about half a dozen blue chips where I have the common plus either a pref or a corp bond. Regardless, if I aggregated, my single company position would still be under my 5% "soft limit"
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

User avatar
Descartes
Gold Ring
Gold Ring
Posts: 1153
Joined: 03 Nov 2008 09:59

Re: Maximum single position size

Post by Descartes » 15 Sep 2017 11:25

ockham wrote:
15 Sep 2017 09:53
For the purposes of this calculation, do folks aggregate fixed income and equity exposures to the same entity?? Or aggregate exposures through individual holdings and fund holdings??
That's an interesting question.
It might also be extended to include related stocks like the Desmarais (PWF-GWO-POW) family or the Brookfield Asset Management group.
If there is a correlation then shouldn't they be aggregated if you are trying to control exposure?

For me, I don't bother with it: a pref is different than a common, BEP.UN is a different animal than BIP.UN.

My biggest single position, excluding ETFs, is 5.94%.
My rule of thumb is 5% or less.
So, over time, as I buy other things during this accumulation phase, I expect that oversized position will drop back down.
"A dividend is a dictate of management. A capital gain is a whim of the market."

User avatar
Spidey
Gold Ring
Gold Ring
Posts: 2989
Joined: 11 Jan 2009 19:55
Location: Ottawa

Re: Maximum single position size

Post by Spidey » 15 Sep 2017 15:57

Not including ETFs because they are already a "basket" of positions, my biggest single position is TD bank which is somewhere between 4-5% of my total investment portfolio.
If life seems jolly rotten, then there's something you've forgotten -- and that's to laugh and smile and dance and sing. - Eric Idle

User avatar
adrian2
Diamond Ring
Diamond Ring
Posts: 11503
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: Maximum single position size

Post by adrian2 » 15 Sep 2017 18:53

My biggest position, at around 15% of the portfolio, is Mawer New Canada, a 10-bagger for me, closed to new investments for the past 15 years or so.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

User avatar
Spidey
Gold Ring
Gold Ring
Posts: 2989
Joined: 11 Jan 2009 19:55
Location: Ottawa

Re: Maximum single position size

Post by Spidey » 15 Sep 2017 21:06

Regarding non-individual stock positions, a Mawer product also takes up a large portion of my portfolio - Mawer global small Cap - perhaps 10% of my portfolio. I wish I could hold Mawer New Canada as well.
If life seems jolly rotten, then there's something you've forgotten -- and that's to laugh and smile and dance and sing. - Eric Idle

User avatar
cannew
Silver Ring
Silver Ring
Posts: 288
Joined: 17 Mar 2010 10:59

Re: Maximum single position size

Post by cannew » 17 Sep 2017 11:20

87% of our portfolios are in four sectors, Banks, Communications, Pipeline\Utilities and REIT (only 10%) spread among 16 stocks. The largest single stock holding is 23% and we don't own any etf's, funds, bonds and no fees. Not very diversified and all Canadian holdings (sold our two US stocks when dollar was way down and reinvested in our other holdings). Suits us and generates a growing income.

User avatar
kcowan
Diamond Ring
Diamond Ring
Posts: 12904
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: Maximum single position size

Post by kcowan » 17 Sep 2017 16:12

AAPL at just under 12% of my equity portion. I will hold it until I am no longer confident. The latest product announcements might signal the beginning of the end. OTOH the latest Samsung Note 8 is pretty much identical to the iPhone X, including price. But I have no reason to ride it down like Enron and Nortel. I will see what the market thinks.

I held Nortel for a little while and doubled my money. I am not greedy. I sold all of AAPL of few years ago to take the capital gains and then repurchased at 65% of the market price but for only half. In hindsight, that was a bad decision prompted by advice to limit exposure. Yea exposure to big gains!

Individual stocks have their own story and it is tough to generalize. But limiting allocation will reduce risk and gains without doing any further study. I enjoy studying individual stocks. Always have.

My 12 convertible debentures give me further exposure to the market but are on the other side. I do not add them together for like companies because they are a different breed of in bankruptcy. They only come together and anyone still holding deserves the outcome. Naturally this does not apply if they hold through an ETF or fund. You have no control over the components.
For the fun of it...Keith

Thegipper
Gold Ring
Gold Ring
Posts: 1160
Joined: 14 Mar 2015 16:58

Re: Maximum single position size

Post by Thegipper » 17 Sep 2017 17:17

My largest Canadian position is RY at about 7%. My four other largest positions are FB, Google, Apple and Amazon at 5 to 6 % each. The fang stocks have basically grown to these percentages and I see no reason to reduce them.

User avatar
Peculiar_Investor
Gold Ring
Gold Ring
Posts: 6932
Joined: 01 Mar 2005 14:52
Location: Calgary
Contact:

Re: Maximum single position size

Post by Peculiar_Investor » 18 Sep 2017 10:13

Peculiar_Investor wrote:
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.
No change in investment policy statement, strategy or philosophy to report.

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%.

The only change that I could report is the composition of our top 5 individual holdings, now they are: ATD.b, BNS, SJ, SYK and GIL.
Imagefiniki, the Canadian financial wiki New editors wanted and welcomed, please help collaborate and improve the wiki.

Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams

User avatar
deaddog
Gold Ring
Gold Ring
Posts: 2550
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: Maximum single position size

Post by deaddog » 18 Sep 2017 11:02

Peculiar_Investor wrote:
18 Sep 2017 10:13
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.
Sounds like a formula for culling your winners and adding to your losers.
Most of our so-called reasoning consists of finding arguments for going on believing as we already do.( J.H. Robinson)

User avatar
kcowan
Diamond Ring
Diamond Ring
Posts: 12904
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: Maximum single position size

Post by kcowan » 18 Sep 2017 15:17

deaddog wrote:
18 Sep 2017 11:02
Sounds like a formula for culling your winners and adding to your losers.
Formula investing never maximizes yields. It just removes emotion from the investing process.
For the fun of it...Keith

THEMAINEVENT
Bronze Ring
Bronze Ring
Posts: 52
Joined: 31 Aug 2010 10:10

Re: Maximum single position size

Post by THEMAINEVENT » 18 Sep 2017 15:32

My super boring portfolio of etf's eliminated thinking about maxium single position size. RY at 1.6% would win out with 25% of XIC (which has 6.42% RY). Apple at 0.75% largest US holding. Woo-hoo big numbers lol.

Post Reply