Module 8 ยท Building a Portfolio and Managing Risk
Risk is the chance of losing money. Manage it with position sizing, diversification and a plan.
Every investment carries risk. The key is not to avoid it but to size it so that a loss does not hurt your plan.
Position sizing means not betting too much on any one stock. A common guide is to keep any single position a small share of your total.
Have a plan before you buy: why you are buying, what would make you wrong, and how much you can afford to lose. Emotion-led decisions are the most costly.
Example: Suzlon
A high-risk, volatile stock like Suzlon should be a small position in a diversified portfolio - never money you cannot afford to lose.
Position sizing means:
Before buying a stock, what three things would you want to have decided in advance?