From the way we handle positions to the level of risk that we can withstand, every investor is different. It’s important to determine the amount of risk you are willing to take and construct your portfolio accordingly.


There are several elements to consider when managing risk:

Market Direction. Consider the market’s direction when making your decision and be aware of where you are in the current cycle.


Position Sizing. Home Run Syndrome is a condition every investor should avoid. Putting your whole account into one stock with dreams of retiring early or buying a new car is unrealistic.


Stop Loss Rule. The 8% loss rule was created to keep your capital safe from a catastrophic loss, like what happened in 2000 and 2008.


Thematic Concentrations. Avoid overconcentration in one industry group or foreign country. Industry groups move together and one downgrade in the industry group could unnecessarily cause excessive losses.


If you haven’t already, you can view our most recent webinar on “Portfolio Construction” here.


As always, if you have questions, you can reach us at (800) 424-9033 or a


Best returns,


The MarketSmith Team