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Sunday 22 May 2016

成也风云,败也风云



The movie, "The Storm Riders (风云)" was an awesome movie which was produced in 1998.





It tells the story of Lord Conqueror, who desires to conquer the pugilistic world and a prophecy foretold that two of his disciples, 风 and 云,would help him greatly in his ambitions.  However, it was also the same two disciples who would also lead to his eventual downfall.

Relating this back to investing.   How much of a single stock or investment should it comprise as a percentage of your total portfolio?   My personal sense and gut feel is 10%, so I tried to validate this to see if I could find supporting facts or evidence over the internet.   The estimates seem to range at about 5 to 10%.   25% was cited in one case as the absolute maximum (only with very very strong justifications and even then, not recommended).    A very good blog post that I found on this topic is given below.  It basically highlights the risks to being too heavily invested in one stock:

What is the maximum portfolio allocation for a single stock?


One of the stocks in my current portfolio alone accounts for 30% of my entire portfolio (of about 30 to 40 stocks).   It is therefore a substantial investment and considered risky (portfolio-wise) as any strong movements up or down will significantly affect the value of my overall portfolio.   I will have to monitor this stock very closely and hope that it provides good upside in the coming months.

The situation that Koon Yew Yin faced when he, as a substantial shareholder of V.S. Industry, while trying to dispose of his shareholdings in the company recently will also highlight the problems when trying to dispose of a significant stake.  Disclosure proved to be very difficult for him.   News article link is below:

The Star Malaysia on Koon Yew Yin



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