It is very likely that even the best investor out there still has losing positions in their portfolio. Anyone who claims otherwise is probably not being truthful. If you are a beginner or even a seasoned investor none of us can seem to avoid a losing position. With the appropriate position size and capital risk it shouldn't be a big deal but as humans we are always looking to perfect the process. Today we will talk a little bit about managing a portfolio to "perfect the process".
I will assume that all of you reading this do not have only one position in your portfolio. If you do then you should change that now. Diversification is not only a safer way to invest but it also makes the game more fun. The problem is that we will have losers. It's just part of the game. Now, you should have a point where you will cut your losses. We have written about this in other articles on the site and you have plenty of options to choose from. But what can you do if a position is moving against you but yet to hit any max loss? You could consider investing some of it in a winner!
A very popular portfolio management technique used by the big guys is to roll your losers into your winners. Now a professional money manager will likely choose to do this so their clients don't see losing positions on their statements but you can do this as a way of maxing out your winners and cutting your losers early. If you have a handful of great positions and a handful of losers you could consider reducing the size of your losers by some percentage and then adding them to the winners.
By reducing the speed of the losing positions and magnifying the winners you are effectively increasing your total returns at the end of the month and potentially at the end of the year. Now there is no magic formula for this but you can tweak it to see how it works for you. This may seem like common sense to some of you but for others it may very well open up a new opportunity you never thought of.