Define the purpose of the portfolio
Start with the time horizon, liquidity needs, and capacity to absorb losses. An investment idea should be evaluated in the context of these constraints.
Examine shared exposures
Different assets can respond to the same underlying forces. Consider how concentration, leverage, and liquidity can affect the portfolio during an unfavorable scenario.
Write down what would change your view
Record your assumptions and review them as evidence changes. A repeatable decision process can help separate thoughtful revisions from reactions to short-term noise.
Consider liquidity alongside allocation
An exposure may behave differently when you need to reduce it quickly. Consider the size of a position, the conditions under which it might be sold, and how liquidity could change in a stressed environment.
Diversify the underlying drivers
Assets that appear different can depend on similar financing conditions or demand trends. Look beyond labels and examine the forces that may cause positions to move together.
Review with a consistent framework
Use the same research questions during periodic reviews. Compare current evidence with recorded assumptions and explain whether the reasoning still holds, needs revision, or remains uncertain.
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