Equal weighting

Giving every position in a portfolio the same size, expressing no view about which is more attractive than which.

Example

Twenty positions on a $250,000 portfolio at $12,500 each.

Important

It is trivial to describe and hard to follow, because it requires putting as much into the holding you are least sure of as into the one you are most sure of - which is exactly where the judgement it overrides is least reliable.

Related terms

• Position size — How much of your total capital a single holding represents - the weight that decides how much any given move actually matters to you.
• Risk budget — The maximum damage you will allow any single holding, or group of holdings, to do to the whole portfolio - stated in advance as a share of total capital.
• Diversification — Holding enough genuinely different assets that no single outcome decides your result. It reduces risk specific to individual holdings; it does not reduce the risk they all share.

Lessons that explain it

• Position sizing: how much of it to own — Sizing is where conviction gets converted into consequences, and it is the one variable in investing that is entirely within your control. Most people set it by feel and discover afterwards what they actually decided. (12 min)

All 578 terms in the Investing glossary