Managing a Concentrated Portfolio - How do you do it?

[Cor]

Hi Gents,

I would greatly appreciate some advise on helping me manage a non-diversified portfolio from the experienced folks here. I am fairly new to investing and have a 30ish year investment horizon for context.

Not by choice, but I ended up with a >50% portfolio allocation in a single SaaS stock (large cap). It lagged the S&P over past couple of years and is taking quite the beating this year along with the entire sector. My general comfort level around a single stock is a 1-2% allocation, and I think I've seen people recommend up to 10% or so typically? 

My general strategy is holding everything long-term and I'm mostly in indices outside of this one position - and some very small "learning" positions in individual names. However, it's discouraging trying to track annualized returns with this one stock weighing everything down so heavily. Part of me thinks I should have sold and moved the funds to an index some time ago, and part of me doesn't want to take the loss and just hold for years to come. 

Stock investing seems hard from a mental point of view and I'm still learning on how to manage my emotions. The recent SaaS dump is tipping the scales a little and I'm just looking for some guidance from brighter minds. Thanks guys. 

 

[SharperDingaan]

Most would sidebar this large and restricted position into it's own portfolio; both for the tax possibilities, and to avoid distorting the 'core' portfolio. Thereafter, everything in the 'core' portfolio invested in anything but SaaS.

 

What you do with that SaaS position, will very much depend on your expertise and experience in the sector. Long term sell or hold dependent on where you think the tech could go, a decision best made when you also have industry expertise. Risk tolerance thing.

 

Good luck.

 

SD 

 

 

 

Edited Saturday at 02:47 PM by SharperDingaan

[73 Reds]

57 minutes ago, SharperDingaan said:

Most would sidebar this large and restricted position into it's own portfolio; both for the tax possibilities, and to avoid distorting the 'core' portfolio. Thereafter, everything in the 'core' portfolio invested in anything but SaaS.

 

Thereafter what you do with that SaaS position, will very much depend on your expertise and experience in the sector. Long term sell or hold dependent on where you think the tech could go, a decision best made when you also have industry expertise. Risk tolerance thing.

 

Good luck.

 

SD 

 

 

 

+1.  Side note:  Any allocation decision with regard to the single stock should be made when you want to, not when you have to.

[Paarslaars]

I mainly do this by praying a lot and crying every now and then...

[Longnose]

I cry on the inside. But know the numbers and story of the company up and down.  Then I remind myself that markets are irrational and in no world would the company be taken private for the current valuation/marketcap. Then i go to sleep with a hope and prayer that the market will recognize how dumb the valuation is tomorrow. 

 

Usually I don't take these positions unless i have really strong conviction. but I am dumb enough to put 75-80% of my eggs in one basket on more than one occasion. 

 

Conviction is probably the biggest piece for me. Doesn't make it more enjoyable but it make holding easier. 

[Cor]

Thanks guys. Sounds like Paarslaars and Longnose just hold through the pain believing their conviction will be rewarded at some point? I do believe the stock I’m holding is an industry leader and quite profitable. I have no reason to doubt that leadership will not hit their revenue goals in the stated timeline and analyst estimates for when they do are so much higher than price today. 
 

Sigh. I guess I’ll start praying too. 

[thepupil]

On 6/12/2026 at 10:53 AM, Cor said:

Hi Gents,

I would greatly appreciate some advise on helping me manage a non-diversified portfolio from the experienced folks here. I am fairly new to investing and have a 30ish year investment horizon for context.

Not by choice, but I ended up with a >50% portfolio allocation in a single SaaS stock (large cap). It lagged the S&P over past couple of years and is taking quite the beating this year along with the entire sector. My general comfort level around a single stock is a 1-2% allocation, and I think I've seen people recommend up to 10% or so typically? 

My general strategy is holding everything long-term and I'm mostly in indices outside of this one position - and some very small "learning" positions in individual names. However, it's discouraging trying to track annualized returns with this one stock weighing everything down so heavily. Part of me thinks I should have sold and moved the funds to an index some time ago, and part of me doesn't want to take the loss and just hold for years to come. 

Stock investing seems hard from a mental point of view and I'm still learning on how to manage my emotions. The recent SaaS dump is tipping the scales a little and I'm just looking for some guidance from brighter minds. Thanks guys. 

 

 

what are the consequences of selling? 

what's your basis as a % of market value

does it have a listed options market? 

are you a candidate for the numerous wealth mgt solutions for this? 

how many years of savings does it represent? Are we walking like "I have $20K of SaaSco and save $50K / year" or "I have $2 million of SaaSco and save $50k / year?"

 

Why hold it?

 

if you're not comfortable with a >50% position, then why have it? 

 

 

 

[Longnose]

To add when it comes to heavy concentrated positions I only see 2 real reasons to be this concentrated.

1. Your chasing extreme returns. 
2. You have extreme conviction in the company. 

Maybe you should ask yourself questions around why am I so concentrated in "SaaSco"  

 

I usually wont go super deep into a company unless I have extreme conviction in my analysis. It still hurts to be early. But i often feel like I'm having this conversation with my devils advocate in my head.  I often feel like burry where i cite the numbers and I'm like the numbers don't make sense the market must be wrong. so i just keep holding. 

 

The volatility doesn't bother me. But i do read and seek lots of material for my opposite hypothesis. I don't want to be blinded by bullishness to where I hold into the ground. I have abandoned a few concentrated in the past after admitting to myself that my analysis was wrong. 

 

[Malmqky]

What's the company?

 

Something like Berkshire, Fairfax, or even CSU is easier to concentrate in due to the diversified nature of the companies.

 

Something like Warrior Met Coal is tougher to concentrate in for obvious reasons.

 

You need to get a few drawdowns of 50% under your belt before you really can feel comfortable concentrating. Otherwise it's gonna be tough for you. The fact you're questioning "how to do it" tells me you're going to have a hard time next market crash holding/not diversifying, etc

Edited 1 hour ago by Malmqky

[Intelligent_Investor]

Don't own anything in a concentrated portfolio you wouldn't be comfortable owning if the market is closed for a decade. 2% position is pointless for individual positions, at that point just buy index funds. 

[TwoCitiesCapital]

Concentration is how you make/lose money. Diversification is how you protect it. 

 

Over time, investment management is an exercise  in both. 

 

I found early on that it was often my smallest positions that outperformed the most and my largest positions that would lag. Had I just equal weighted the portfolio, I'd have done much better. I made adjustments to my approach as a result. 

 

I never equal weighted, but set a limit on my largest positions as a % of my net worth to force more money to funnel down into the smaller ideas. The hope was I'd prevent some damage if I continued to be wrong, but still give myself grace in getting better/more right over time. 

 

As such, I typically start positions at ~1% of my net worth, a full allocation would be ~3-7%, and I only have two investments at the ~10% limit which have largely grown there and weren't allocated there. 

[Red Lion]

8 minutes ago, Intelligent_Investor said:

Don't own anything in a concentrated portfolio you wouldn't be comfortable owning if the market is closed for a decade. 2% position is pointless for individual positions, at that point just buy index funds. 

 

I see a lot of value investors say this, but if you're an affluent individual living off of your taxable portfolio, and you can match the S&P performance with 2% positions, this gives a lot of wiggle room for tax efficiency. The big IF is whether you could match the S&P performance, but there have been great investors that had lots of stocks. 

 

If you have all your money tied up in 3 stocks that are all sitting on gains, and you're holding them for decades, you have no choice but to sell stock, take margin on a super concentrated portfolio, or hope they pay dividends. If you pick the right 3 stocks, great. If you're taking a buy and hold approach, or buy/hold/tax loss sell the losers, you're more likely to hit some huge long term winners if you get 50 chances. 

 

Retirement accounts I think would be a much higher hurdle, since I suspect the highly concentrated portfolio with event driven type ideas probably shows the highest return if well executed. 

[Gregmal]

End of the day it's as simple as making the position as big as you're personally comfortable with and holding it until you dont want to hold it anymore. Beyond that it's kind of a waste of time having hard rules and all that because the whole point of being in the market is to capitalize on opportunity. 

[Longnose]

2 minutes ago, Gregmal said:

End of the day it's as simple as making the position as big as you're personally comfortable with and holding it until you dont want to hold it anymore. Beyond that it's kind of a waste of time having hard rules and all that because the whole point of being in the market is to capitalize on opportunity. 

God i love how you can simplify thoughts into such a blunt object. 

 

#gregisrighttoday

[73 Reds]

19 minutes ago, Longnose said:

God i love how you can simplify thoughts into such a blunt object. 

 

#gregisrighttoday

As mentioned before, its really no different than a business owner maintaining most or all of his/her wealth in the business.  The advantage is the business owner has complete control, but otherwise the issues are the same and it would be silly to advise a business owner to sell or take on partners unless necessary or desired.

[thowed]

Alternative view I saw recently, referring to Goldblatt I think, was saying that your largest position should be the one you think you are least likely to lose money on.

[Gregmal]

13 minutes ago, thowed said:

Alternative view I saw recently, referring to Goldblatt I think, was saying that your largest position should be the one you think you are least likely to lose money on.

I think it depends on sizing. If your "largest" position is less than 10% it really doesnt even matter. Generally I think on one's best ideas you should be OK putting 5-7% of the portfolio "at risk". Meaning if you think theres potentially 50% downside a low teens allocation is reasonable.