How I start buying Business (Stocks)
It all depends on your conviction and homework.
If management has skin in the game- Typically I start with atleast 1 stock if it’s a lab test for me.[this way i can monitor it going forward].
Once I have done the due diligence (10k, 10q, transcripts) have confidence on management I do 1% if it’s cheap on an absolute level and I understand the company business, unit economics and their customers better.
In the pass I tried kelly formula but left it. No position will cross 5% of the portfolio.
PS: I keep 1.5 years of CASH regardless for market conditions for managing my expenses. [this is DO NOT TOUCH Pile]
PS2: Left over Cash is considered as 100% from an investing perspective
PS3: As market keeps going down, I would start buying the business/stock 1% and keeping chipping in slowly for every 1-5% downward move
PS4: We should only invest money in the markets which we do not need for next 5 years. As per stats recession typically last 2 years and then everything goes back to normal [last 3 market drawdowns, remember things can change and everytime is different so be careful]
PS5: the number one rule is to stay in the game and not sell wonderful business at wrong time and give them sufficient time to bounce back.
Things keep changing and I do change my views, above is just a framework/process i follow and it has served well for last 4+ years, every person should understand their personality and find their equilibrium. Everyone’s situation is different!