No single satellite position starts larger than we would be willing to see fall 80%. That one rule has saved us more money than any call we have ever made. You cannot control whether a thesis is right; you can always control how much it costs you to be wrong.
Category: Portfolio Strategy
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Rebalancing: When and Why We Trim Winners
Rebalancing feels wrong because it means selling the thing that is working. But a position that has doubled is now twice the risk it was when you sized it. Once a quarter we trim anything that has drifted more than five points above its target weight and top up what has lagged. It is unglamorous and it is most of the job.