What is Position Sizing?
Position Sizing The process of determining the appropriate dollar or percentage allocation of each investment within a portfolio to manage risk and optimize return, based on objectives and constraints.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Position Sizing” Used in Practice?
Disciplined position sizing is critical to prevent overexposure to any single asset or security.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Position Sizing?
The process of determining the appropriate dollar or percentage allocation of each investment within a portfolio to manage risk and optimize return, based on objectives and constraints.
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