Professional Stock Portfolio Management

Institutional-level portfolio management maximizes risk-adjusted returns.

Portfolio Construction

Core-Satellite Approach

• Core (60-70%): Index funds or blue chips
• Satellite (20-30%): Active stock picks
• Tactical (5-10%): Short-term opportunities

Factor Diversification

• Growth factor
• Value factor
• Momentum factor
• Quality factor
• Size factor

Position Sizing

Kelly Criterion for Stocks

• Optimal position size based on edge
• Use half-Kelly for safety
• Maximum 10% per position
• Adjust for correlation

Risk Parity

• Equal risk contribution per position
• Higher volatility = smaller position
• Lower volatility = larger position
• Better diversification

Risk Management

Portfolio Beta

• Measure market sensitivity
• Beta > 1: More volatile than market
• Beta < 1: Less volatile
• Target portfolio beta based on outlook

Drawdown Management

• Maximum 20% portfolio drawdown trigger
• Reduce exposure systematically
• Rebuild gradually after drawdown

Hedging Strategies

• Portfolio puts for tail risk
• Inverse ETFs for tactical hedging
• Cash allocation management
• Sector hedges for concentration risk

Performance Attribution

What to Track

• Alpha: Return above benchmark
• Sharpe Ratio: Risk-adjusted return
• Maximum drawdown
• Win rate and average trade
• Sector allocation effect

Benchmarking

• Compare to S&P 500
• Benchmark to relevant index
• After fees and taxes
• Risk-adjusted comparison

Rebalancing

Systematic Approach

• Calendar-based (quarterly)
• Threshold-based (5% drift)
• Tax-aware rebalancing
• Use new money to rebalance

Professional Habits

1. Document every investment thesis
2. Set position limits and stick to them
3. Review portfolio weekly
4. Full audit quarterly
5. Adapt to changing market conditions