How Much Of Your Money Is In That One Stock?
Picture this: You're sitting at your desk in Karachi, sipping your morning chai, and you pull up your PSX portfolio on your KATS trading terminal. You notice that one particular stock—let's call it Lucky Cement (LUCK) or perhaps Oil & Gas Development Company (OGDC)—has been on a phenomenal run. It's up 40% in the last six months. You're feeling good. You're feeling like a market genius.
A Comprehensive Guide to Position Sizing in the Pakistan Stock Exchange (PSX) Introduction: The Question That Could Save Your Portfolio Picture this: You're sitting at your desk in Karachi, sipping your morning chai, and you pull up your PSX portfolio on your KATS trading terminal. You notice that one particular stock—let's call it Lucky Cement (LUCK) or perhaps Oil & Gas Development Company (OGDC)—has been on a...
But then, you pause. You start calculating: How much of my total portfolio is actually in this one stock?
This question is simple, but it's one that most investors in the Pakistan Stock Exchange rarely ask themselves with honesty. It's a question that separates amateur investors who occasionally get lucky from professional investors who consistently build wealth over decades.
The reality is that many investors in Pakistan have dangerously concentrated portfolios. They might have 40%, 50%, or even 70% of their entire net worth tied up in a single company. Maybe it's a family business. Maybe it's a stock they inherited from their father. Maybe it's a stock that has performed so well over the years that it naturally grew to dominate their portfolio without any conscious decision to make it...
Whatever the reason, the question remains: If that one stock dropped 20% tomorrow, would you be fine, or would it wreck your whole portfolio?