Position sizing for long term investing

[nwoptions]

Hi all,

I would like to invest in the SPY for the long term (retirement). Is position sizing important when it comes to investing?

The common position sizing guide I see being suggested in trading books is "risk 1% of capital." Does this apply to investing? or does it not matter as much?

Thanks

 

[Daal]

The trading rule does not apply, however it is important to avoid large allocations to stocks as you might not have the stomach to deal with a big drawdown. -50% drops in US equities happen from time to time and most people will be selling at the bottom if they own too much. In my studies I have found that the point where equities start to hurt risk-adjusted returns in a portfolio is around 30%. That doesnt mean an investor shouldn't go higher, they just need to be aware that they will need stronger hands to deal with the extra volatility

 

[murray t turtle]

Hi all,

I would like to invest in the SPY for the long term (retirement). Is position sizing important when it comes to investing?

The common position sizing guide I see being suggested in trading books is "risk 1% of capital." Does this apply to investing? or does it not matter as much?

Thanks

%%
YES;
but its really hard to goof up a spy profit. SO if you plan on putting in 12 months of 2021buys dont worry about it. But with FEB/ MAR looking stronger than 2020 FEB/MAR, that gives a hint.
So after you make a profit on 1% or 10%/makes more sense to do 20 or30%,by MAR31
SPY has not crashed since 1987 \bear markets seldom start in MAR.

It has bigger drawdowns, but i do QQQ +spyg......... also/spy/growth/but thats personal.
SPLV sounds like it would be great trender, too low for me \but thats its name I label things trade [with stop loss] or invest.............................................................

 

[Nobert]

1%.

Does this apply to investing? or does it not matter as much?

Hey nwoptions,

no, in investing - it doesn't apply at all, unless one doesn't know/understand that which he is buying. ,
Important thing is, what kind of time horizon do we speak about ?
(In other words - how old are you ?)

 

[murray t turtle]

Hey nwoptions,

no, in investing - it doesn't apply at all, unless one doesn't know/understand that which he is buying. ,
Important thing is, what kind of time horizon do we speak about ?
(In other words - how old are you ?)

%%
BUT thats the beauty of not ''knoWing'' what exactly we are buying to make a max profit.
Same with trade or investing; but a SPY, or qqq investment has less comissions\ more dividends/less slippage.
But an occasional SPY+ sometimes UPRO trade make s more for market makers makers/specialist/brokers + us sometimes ......................................................H e is a young guy or @ least has a young mind.LOL I had such drawdowns in SPXL,2020 i trade upro + SPXL smaller + less this year. SPYG has gone up again/open to open/low to hi/lo to lo, today/no telling how it closes Most are up this year/month

 

[Nobert]

%%
BUT thats the beauty of not ''knoWing'' what exactly we are buying to make a max profit.
Same with trade or investing; but a SPY, or qqq investment has less comissions\ more dividends/less slippage.
But an occasional SPY+ sometimes UPRO trade make s more for market makers makers/specialist/brokers + us sometimes ......................................................H e is a young guy or @ least has a young mind.LOL I had such drawdowns in SPXL,2020 i trade upro + SPXL smaller + less this year. SPYG has gone up again/open to open/low to hi/lo to lo, today/no telling how it closes Most are up this year/month

If hes above 50+ i would say average in through the period of 3 - 4 years , wheres the position no more than 50% of the whole net worth.
What do you think murray ?
Even for a young one, going all in at once at these levels with 100% of net worth, nahhh, especially if there's no skills neither stomach.
(As @Daal wrote)

 

[murray t turtle]

If hes above 50+ i would say average in through the period of 3 - 4 years , wheres the position no more than 50% of the whole net worth.
What do you think murray ?
Even for a young one, going all in at once at these levels with 100% of net worth, nahhh, especially if there's no skills neither stomach.
(As @Daal wrote)

%%
Sounds aboUt right, Nobert.
AND he needs to buy or borrow or library card the books by Florence Littauer/Personality Profile/How to get along With Difficult People.
Good buy for now LOL/ SPY +QQQ still look good on monthly/4 hour charts.MY spyg buy got hit today..................................................................................

 

[Nobert]

by Florence Littauer/Personality Profile/How to get along With Difficult People.

 

[christielowe]

The trading rule does not apply, however it is important to avoid large allocations to stocks as you might not have the stomach to deal with a big drawdown. -50% drops in US equities happen from time to time and most people will be selling at the bottom if they own too much. In my studies I have found that the point where equities start to hurt risk-adjusted returns in a portfolio is around 30%. That doesnt mean an investor shouldn't go higher, they just need to be aware that they will need stronger hands to deal with the extra volatility

Don’t you think that high position size when accompanied with high leverage would magnify not just your profits but also your losses. This is probably one of the most common reasons why the noobs blow up their account within record time.

 

[Nicolemaz]

Don’t you think that high position size when accompanied with high leverage would magnify not just your profits but also your losses. This is probably one of the most common reasons why the noobs blow up their account within record time.

No denying in that. A single or tiny movement in the market against you would result in high losses and could also end up wiping out your entire account. Not just this, the financing costs keep rising because you don’t stop borrowing money from the broker. I for instance make sure to stick up with low leverage and small position size when trading with fxview and avatrade. Keeps me happy.