Value investing · Course 21 of 39 · The practice
Portfolio construction and risk
How much to put in each idea, how many ideas to hold, what correlation does, and why cash, drawdowns and leverage decide whether you stay in the game.
For a reader who holds, or plans to hold, more than one company at a time. Buying a good business at a fair price is only the first decision. How much of the portfolio it gets, how many other companies sit beside it, and how much stays in cash are separate decisions, each with its own arithmetic.
After this course you can size a position by what a wrong thesis would cost the whole portfolio rather than by how sure you feel, see what adding holdings does and does not remove, and plan for a fall before it happens so that it never forces a sale.
It assumes Investing from zero, The value investor's mindset and Credit for equity investors, where the same leverage mechanics first appear on a company's own balance sheet.
The method, not the running of it
Portfolio construction and risk is 7 lessons on running the whole method on one company. Running it is the part that only happens against real filings, on a real date, and this course has none of yours. It also cannot tell you the day one of your reasons stops being true, which is the part that matters after you have bought.
See our methodology for how the product reads a filing and what it refuses to compute.