howardroark On Bet Sizing

Very good:

"even when I have an opinion on a company's value versus its market price, I try to consider how fragile that opinion is. That is, because I understand that being in the business of actively picking stocks as opposed to passively minimizing risk across thousands of baskets, I not only seek situations where I have an opinion, but those where I can have as much certainty and precision as possible. The less certainty and precision I felt I had, the greater return I would require and the smaller portion of my capital I'd be willing to commit to that investment. The more you choose to eschew certainty and seek return, the more important it is to diversify your bets. Even if you get someone to give you 40:1 odds at roulette wheel, you'd better be sure you're making a lot of bets. [...]

I respect the fact that, even in cases where I feel relatively certain, I still can't perfectly predict the weather. I can't know for sure if pipeline will run dry, or consumer tastes will abruptly shift, or a technological disruption will come out of nowhere, or if the company has for years been violating federal Medicare laws. So even after restricting myself to situations where I feel I have a valuation opinion and a higher than normal degree of certanity in my ability to see the future, I still try to avoid imprudent concentration of risks."