Why Position Size Matters in Investing | EP151

Portfolio Manager Manar Hassan-Agha discusses the importance of position sizing in investing and how factors like behavioural biases, market structures, and optimal betting strategies under the Kelly Criterion can impact returns at varying position weights. The conversation explores limitations in precisely calculating probabilities and edges for stock investments and how frameworks and checklists can be used dynamically to thoughtfully consider odds, edges, and optimal sizing for investment decisions. This discussion highlights the various personas or strategies that investors can adopt in dealing with both the winners and losers in their portfolios. Many of the concepts discussed in this episode are the research and works of others. Manar talks through how we think about applying their lessons dynamically and from a first-principles basis to the day-to-day management of portfolios at Mawer.

Key points from this episode:

• Lessen the emotional impact of a large loss on a single position with position sizing
• Use the Kelly Criterion to determine the optimal size of a bet, taking unpredictability into account
• Resist the instinct to embrace either nihilism or precision in investment decision making
• Tailor position-sizing approaches to your own investment style and risk tolerance

Host: Rob Campbell, CFA, Institutional Portfolio Manager
Guests: Manar Hassan-Agha, CFA, Mawer Portfolio Manager

For more details and full transcript visit: [episode link]
This episode is available for download anywhere you get your podcasts.

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Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.
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