Q: What is the scope of one’s asset base that one should include in the position sizing and risk management analysis? Presumably, folks have longer term investments that are the bulk of the monies they will need in retirement, medium term investments that one can take some medium level of risk, and shorter term (maybe even day trades) investments (many a small percent of one’s overall asset base) that one will subject to greater risk.
Should all these components be included in the position sizing and risk management analysis, or should we have different strategies for managing these different components of one’s asset base?
A: Each account should be subject to some form of position sizing depending upon the objectives of the account. But don’t lump all the funds together. Treat the equity for each account separately.