The Science of Position Sizing in PMS Strategies

The Science of Position Sizing in PMS Strategies

Most investors focus on “which stock,” but professionals focus on “how much of that stock.” Position sizing determines risk far more than stock selection.

PMS managers use scientific frameworks:
• Volatility-based sizing: Larger allocation to stable stocks, smaller to volatile ones.
• Conviction-based sizing: Higher weight to high-quality ideas with consistent fundamentals.
• Risk-budget sizing: Total risk allocated across sectors and factors.
• Dynamic sizing: Adjusting positions as fundamentals or risks change.

Proper sizing prevents concentration risk, reduces drawdowns, and enhances long-term consistency. Even a great stock can hurt returns if sized incorrectly.

Truvest Insight:

In wealth management, position size often decides success more than position selection.

Disclaimer:

Educational only. Not investment advice.