Portfolio Sizing Strategies | Invader
What is an Invader in the investing world?
Investing styles
There has been different strategies which people adopt in the investing world
- Buy & hold: safe solid bets, wont disappoint. In fact a simple buy and hold of index funds plus top blue chip stocks would get a better average return than most of the hedge funds (Warren Buffet type)
- Traders: Who are active and want to increase the alpha (difference between their profits and the S&P 500 returns)
- Invaders: Part time investor + part time trader; better represented in terms of capital deployed. As an investor you would probably have 60-70% of your capital in solid long term stocks, and would have 30–40% capital deployed into for swing trading leveraging the volatility in the market
My investing style
I love being part time investor + part time trader. Thanks to Jonah Lupton for introducing me to the “invader” concept! I have my reasons.
- Part Investor(60–70% capital): Solid long term investing stocks + ETFs would guarantee long term investment growth. However this wont teach me the way the stock market works, or functions and by that yarstick I may not even know how to pick the the next 10-bagger.
- Part time trader(30% capital): This would give me a strong incentive to learn the fundamentals of the stock & also technical analysis to find the right entry points. I’m not into speculative trading / day trading. but definitely if there is an opportunity to cash in the swing trade — I would jump on it. Some of these swing trades can potentially become long term stocks, as I understand about the company better.
- Cash: 1-10% Always handy cash. Or deploy new cash every month.
I have been into solid growth stocks and not into options yet. There is some risk with growth stage companies but I really enjoy researching and following the next set of growth stocks.
My investment thesis
I go by an investment thesis — for next 20 years which are the industries which are going to look different and which companies would be responsible for that.
case in point — for the next 10–20 years, I don’t think i will invest in
- Oil: Oil could demise in next 25–30 years.
- Banks: current banks which are slow to maneuver, will face challenges from the neo banks & the fintechs.
- Airlines: Not a profitable business with the volatile oil prices, rising costs, possible decreasing travel; After Covid, travel will still be there, though it may reduce a lot, unless absolutely essential.
Which industries could see the next boom
- Cloud
- Omni channel retail
- Fintech
- Pharma
- Green Energy
Decide which companies are the best in each of these industries. And then decide how much you want to invest in each of these industries. Always invest in true market leaders and maybe second best. Don’t look for any cheap stocks ( unless you are swing trading).
Portfolio Sizing
This is my current portfolio sizing strategy
- Highest conviction: I can sleep easily, no matter what happens with the prices. Will always add more during the market correction — Looking for the 8-10x returns in next 5 years
- Building Conviction: Almost there in terms of conviction, and in fact would increase the position as and when there is an opportunity (Bollinger Band example or when the stock hits 50dma, 100dma, 200dma)
- Moonshots: Next SQ, next ETSY, next TSLA — have good line if sight into the market & the company, but the company is just starting to prove. (wouldn't feel bad if the stock loses a bit a little, but wont deploy so much capital that I would have sleepless nights if it dips 20%)
- Increasing Starter: same as moonshots — but these are the companies i just discovered, and I’m increasing the starter position — could be playing for a swing as well if the market dips
- GARP(Growth At Reasonable Price): These are like savings accounts in the stock market. wont move much either way, unless something of pandemic hits. they have already grown so much in the past, that growing 10x in next 5 years is almost impossible, but wont harm keeping them as a hedge to the market directions.(AAPL, AMZN, MSFT, CRM, NVDA, ADBE)
- Starter position: Any stock which looks promising & interesting. Buying even a few shares to track in the main screen.
This has worked well for me to stay grounded on not deploying capital emotionally during ups and down.
How brokerages could help
Being disciplined about it is important. I wish the brokerages accounts like Robinhood, Etrade, webull, could feed this investment thesis and help disciplined about the stock would have been so useful to folks like me, more on the wish list for brokerages to provide a fantastic experience later.
Basically nudge me to stop from emotional buy & sell.
Fintwit’s Investing style
Other fintwit colleagues who shared their investing style & sectoral bets:
