Risk, Portfolio, and Mental Frameworks

Determine appropriate position sizes based on conviction, risk tolerance, and portfolio context, understanding that sizing is more critical than entry timing.

Distinguish between effective diversification and 'diworsification' that dilutes returns without meaningfully reducing risk.

Identify hidden correlations in a portfolio where different assets behave as a single trade under stress.

Internalize the asymmetric math of drawdowns: why losing 50% requires a 100% gain just to break even.

Design and pre-commit to hard stop-loss and take-profit rules to enforce discipline before emotions take over.

Evaluate portfolio performance using risk-adjusted metrics like the Sharpe Ratio and maximum drawdown, not just raw returns.

Apply mental models like 'base rate thinking' and 'expected value' to investment decisions to counter narrative-driven biases.

Develop a decision journal to systematically track your reasoning, process, and outcomes to enable genuine improvement.