Position sizing

Position sizing is the decision of how much money to put into a single investment relative to the rest of a portfolio. It is a separate decision from picking which stock to buy, and arguably just as important to long-term outcomes.

Even a great investment idea can hurt a portfolio badly if it is sized too large and turns out wrong, while a modest idea sized sensibly does limited damage even if it fails. Position sizing is one of the main practical tools of risk management, and should generally track how much conviction and how much real knowledge an investor actually has about a given company.