Level 2 · lesson
Position Sizing
How much money one idea deserves.
Why it matters
Being right or wrong gets all the attention. How MUCH you were right or wrong decides your life.
In plain language
Position sizing is deciding what fraction of your money one idea gets. The same idea at 3% of a portfolio is a spice; at 60% it's your biography.
Size should scale with how survivable a total loss would be — not with how excited you are. Excitement is precisely the wrong sizing instrument, because the most exciting ideas are usually the most binary.
Professionals often think in questions like: if this goes to zero, is my year ruined or my decade? The answer sets the size before the conviction gets a vote.
In real life
You can adore a perfume; you still don't buy it by the bathtub. Adoration and quantity are separate decisions everywhere else in life too.
In the market
A biotech moonshot at 2% of the bag is a lottery ticket you can laugh about. At 40%, its trial results become your trial results.
The common mistake
Sizing by conviction. 'I'm SURE about this one' has financed more disasters than any bad idea ever did.
“Most disasters were good ideas, oversized.”
Quick self-check
You find an idea you're 'absolutely sure' about. What should decide its size?
Reveal Theia’s answer ↓Theia’s answer ↑
What happens to you if it goes to zero — not the sureness. Certainty is a feeling; sizing is engineering. Build for the version of the future where you were wrong.
Education, not financial advice. Markets involve risk; nothing here is a recommendation to buy or sell anything.