$ qubo learn foundations/02

Position sizing and diversification

Two portfolios holding the same assets can behave very differently, simply because of how much each position weighs. Position size is the share of the total portfolio held in one asset.

A useful exercise is to ask what a 30% fall in one asset would do to the whole portfolio. If that asset is 50% of the portfolio, the total falls by 15%. If it is 5%, the total falls by 1.5%. The asset is the same; the weight changes the outcome.

Diversification spreads exposure across assets that do not always move together. It reduces the impact of any single asset. It does not remove market-wide risk: in a broad sell-off, many crypto assets tend to fall at the same time.

Weights also drift. A position that rises fast becomes a larger share of the portfolio without any new purchase. Checking weights from time to time shows how concentrated a portfolio has become.

// rule to remember

// your turn

In Portfolio, write down the weight of your three largest positions. Calculate what a 30% fall in the largest would do to the total.

Educational content only. Not investment advice. Past data does not predict future results. Risk disclosure