TheStreet Pro's experts explain how to invest like a Wall Street legend.
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00:00That one concept that all of these great investors share is that they do not overly diversify.
00:08They when they have a good idea, they go in big that they really try to press the situation when they have an advantage.
00:18You know, Buffett and O'Neill and all those others say that diversification is just an excuse for ignorance,
00:26that you really need to know your stocks so that you can feel comfortable that you can take an outsized position.
00:35You don't manage risk by just buying a lot of stocks.
00:39You manage risk by really knowing your stocks.
00:42And all of the greats have that same strategy.
00:45Everyone Soros, you know, Munger and so on.
00:49They all say the same thing about go big when you have an advantage.
00:55Can I ask about that? Because I think that's a really good topic.
00:58And I know that Lewis, which we'll get to in a minute, has written a lot about position sizing.
01:03And I know in the StreetPro portfolio, sort of the average position size is somewhere around three percent.
01:10There's around 30 stocks in the portfolio. How do you know, Rev, when a position is too big?
01:16Like, how do you press the size? You've talked also about trading around a position, too.
01:22How do you decide how many shares to own of something?
01:28Well, I typically am very incremental in the way that I invest. I don't just make a single buy in a single sale.
01:37I'll start off with a small position and then I'll start ramping it up or just watching it or whatever, depending.
01:46The ultimate size. Well, the way I think about it is that I diversify by time frame rather than by security.
01:54I'm trading the same stocks in multiple time frames.
01:58So that's what protects my that's what manages my risk.
02:03If I'm only holding a stock for a few days, then my risk is much less than it would be if I'm just holding one big position over a very long period of time.
02:14So my my position size can vary from a few hundred shares to, you know, several thousand shares very fast.
02:23And that's how I manage the risk. And it really goes back to something that George Soros said.
02:30And I think this is really the key to all investing. And that is that it's not whether you're right or wrong.
02:37It's how much money you make when you're right and how much you lose when you're wrong.
02:42So in other words, when you're when you feel you're right, you got to press, add, be aggressive, maybe trade more in the short term.
02:50And when you're wrong, then you get out of the way fast and try to minimize that loss as much as possible.