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
- Document every investment thesis
- Set position limits and stick to them
- Review portfolio weekly
- Full audit quarterly
- Adapt to changing market conditions