The Art & Science of Position Sizing
A cricket team has 11 players, but no captain walks into a match thinking, “I have 11 players, so I’ll give each of them exactly the same role.” The opening batsman, the middle-order player, the all-rounder and the specialist bowler all have different jobs to do, and even among good players, some naturally carry more responsibility than others. Portfolio construction is no different.
At VIKA Wealth, we believe one of the most important, and often overlooked, decisions in investing is not just what to own, but how much to own. This is where position sizing comes in, and we believe it is both an art and a science.
Good companies don't automatically deserve equal weights
Imagine you have 20 companies that you like. Giving each of them a 5% allocation may look diversified, but should every company really carry the same weight? Probably not. One company may have stronger earnings visibility, another may have a better valuation, and a third may offer a significant long-term opportunity but with higher uncertainty. Yet another may be an excellent business whose current valuation leaves less room for upside.
The conviction may be different, the risk may be different, and the opportunity may be different. So why should the weights be the same?
Think about a cricket team
A captain may have a batsman who consistently scores runs under pressure, and that player is likely to have a bigger role. Another player may be talented but relatively inexperienced; he may still be important to the team, but the captain may not put the same responsibility on him.
The same applies to a portfolio. Higher conviction can justify a higher allocation, but conviction alone isn’t enough. You also have to consider:
- Valuation
- Risk
- Earnings visibility
- Upside potential
- Portfolio concentration
- Correlation with other holdings
The objective isn’t to give the highest weight to the stock you like the most, but to give the appropriate weight relative to the opportunity and the risk.
Position sizing can matter as much as stock selection
Suppose Stock A generates a 30% return, but you allocated only 2% to it, so its impact on the portfolio is limited. Now suppose Stock B generates 20% and you allocated 8%; the contribution to the portfolio can be very different.
This is why being right about a company isn’t enough. You also have to be right about its importance in the portfolio, and that’s where position sizing becomes critical.
But don't make the star player carry the entire team
There is another lesson from cricket. Even if you have an exceptional batsman, you don’t send him out expecting him to win every match alone; you build a team around him. Similarly, even if we have very high conviction in a company, we need to understand what happens if the thesis doesn’t play out. A portfolio should not depend on one stock being right, and this is where risk management meets conviction.
The weight should change when the thesis changes
A captain doesn’t decide before the match that a bowler will bowl exactly four overs regardless of what happens, because the situation determines the decision. Portfolio weights should work similarly. If earnings expectations improve, valuations become more attractive and the investment thesis strengthens, the weight may deserve to increase. If valuations become stretched, fundamentals deteriorate or the original thesis weakens, the weight may need to come down.
Position sizing, in other words, is not a one-time decision but an ongoing assessment of conviction versus risk.
The real skill isn't finding 20 good stocks
The real skill lies in knowing which stocks deserve 2%, which deserve 5%, which deserve 8%, and which deserve no allocation at all. That’s where portfolio building becomes more than stock picking, and at VIKA Wealth, we believe every position should have a reason behind its weight.
Because ultimately, a portfolio isn’t just a collection of good companies; it is a collection of decisions about where to place capital, and how much conviction to express in each decision.
Just like cricket, it’s not only about having good players, but about knowing how much responsibility to give each one.
- Oct 9, 2026
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Disclaimer: All the above views are for educational purposes and are not given as investment advice.
If our approach resonates with you, let’s discuss how your portfolio aligns with your long-term goals
About Author
Sri Subhash Yerneni
Sri Subhash is an astute banking and finance professional with 14 years of real-world experience in wealth management, advisory of financial instruments such as mutual funds-equity and debt-alternate investment funds ( AIF)-structure and offshore products-private equity-venture capital/debt-bonds and MLDs-priority banking-cash management-team management-and working with various cultures in various nations.
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AMFI-registered Mutual Fund Distributor – ARN 257866
AMFI-registered SIF Distributor – ARN 257866
APMI PMS Distributor – APRN00458
Quick Links
Services
Contact Info
3rd Floor, Plot No. 55/A, Rd No 52, BNR Hills, Jubilee Hills, Rai Durg, Hyderabad - 500081
Copyright © 2025 VIKA WEALTH – All Rights Reserved.