@Meri would be a good third choice
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As a trader, I must intervene here to say that merely looking at and condemning position size in a portfolio is outright wrong (this applies to traders who use a stop-loss level in every trade). You ALWAYS have to consider where the tradeâs stop-loss is. The stop-lossâs location combined with the position size determines the overall risk of an individual trade. Iâm bolding many things here because when discussing these matters (outside of professional traders), one sees so many completely erroneous claims.
I could also phrase it differently: Diversification (in the traditional sense of the word) is pointless if a stop-loss is not set for the trade. In that case, your risk when longing is the size of the position (theoretically), and when shorting, itâs theoretically infinite. What Iâm trying to say is that, to put it bluntly, a traderâs position size can be, for example, 5x the entire portfolioâs equity, if the tradeâs stop-loss is -0.2% (-> 1% of the total cash is risked in one trade). I wouldnât engage in such leverage myself, but it can be done, and from a risk management perspective, itâs perfectly fine! But it just emphasizes that the stop-loss ultimately determines the risk!
Regarding Jukkaâs TSLA weighting, I as a trader would only be concerned for two reasons:
- Because, as I understand it, this is not an intraday trade but a swing trade, it involves significant overnight risk in the position and carries market risk for longer than trading intraday.
- Presumably, no stop-loss has been set for this trade (this is a pure guess, but I recall this from previous swings), and even if it had, it doesnât work in pre- and post-market.
So, once again, I emphasize: If you intend to criticize a trader for âdiversification,â you must also include the examination of the stop-loss, because only and solely the combination of these determines the overall risk of the trade, and thus the so-called cash risk!
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Exactly. And Jukka has previously said that he only risks 1-2% of his portfolio on one trade. Now Jukkaâs entire portfolio has taken a hit of about 3-4% due to that Tesla position, meaning the man has not followed his own ârulesâ, because a position of that size would have required a really tight stop loss that would have already triggered.
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If this were the manâs only portfolio, there would be a point.
However, we know that it is not, and it probably represents a few percent of his total assets.
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I must clarify that Jukka does manage a multi-million-euro portfolio, but he only owns a minority share of it. Someone external has funded it.
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Iâm surprised that someone went long on Tesla in such a bearish sentiment, where there isnât much support to be found. A Tesla position could have easily dropped 20-30% recently. In my opinion, a big drop doesnât rule out the possibility that the trend will continue. Nothing has indicated a reversal in the other direction so far.
Theyâre probably playing with small money in this portfolio.
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And at any time, news, a tweet, an investigation/scrutiny could emerge that would swing Teslaâs stock by double-digit percentages. I donât quite understand the size of the position in such a volatile stock at all, especially given Lepikkoâs earlier cautious track record. This kind of thing I would understand from Muskovites or Robinhood/TikTok professionals, but they donât even know what theyâre doing.
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Maybe so, but itâs not a joke portfolio for Jukka where he would just YOLO. He has strong disagreements with Paasi constantly, and he surely wants to show them. In addition, he presents his portfolio to the public weekly.
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Let the portfolios of ten million be elsewhere. However, that is the Titansâ Clash portfolio that should be used to advertise trading and beat competitors. The Clash portfolios have by far the most followers in Shareville, and Lepikkoâs (Lepikön) portfolio is the most popular of all.
In my opinion, it doesnât matter whether Tesla goes down or up. Lepikko (Lepikkö) advises one thing but does another. If the pursuit of returns continues as desperate gambling, half the portfolio will soon be in Bitcoin.
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Diversification (in the traditional sense of the word) is pointless if a stop-loss is not set for the trade.
I didnât understand this part 
I never trade, but if I put my investment assets into GameStop for a day without a stop-loss, I could lose 20% or much more. If I put my assets into an index for a day, I would lose more than 20% only if it were a Black Monday in October 1987.
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Hey, that Tesla bet wasnât pulled out of thin air. Itâs also still ongoing.
In trading, you have to accept that you donât always hit it big. Leppikkö can definitely cover his losses, and with interest too. Iâm sure he has a stop-loss.
Iâve had some longs that were down 40%, but if the main trend is in the same direction, Iâve bought more. Big losses come when you try to disagree with the trend and dilute into falling knives. Especially if you go on tilt and buy too much, the outcome is bad. This is really dangerous with shorts.
The guysâ videos are unparalleled and educational, whether the investment strategy is short or long.
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Timontti could hold his super stocks. First, he could look for quick doublers, trading those around, and I could trade 50 stocks every day :D. Meri could do the same, but only with energy stocks?
âSo, Viljo, your portfolio has been traded a bit more this week.â âWell, yeah, a fair bitâŠâ
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From the back seat, I would also like to point out that one can also diversify over time. For example, if you switch your entire portfolio to a different target once a week, and if, say, 30 different stocks pass through your portfolio during the year, then the diversification is roughly into 30 stocks, by rule of thumb.
And you donât necessarily have to use a stop-loss, and yet the risk level is quite controlled.
Of course, you have to be sharp about the costs.
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I was thinking about the same thing sometimes, @enska. At least omitting the verbal recommendation would simultaneously ignore the risk-adjusted perspective regarding that aspect (risk).
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Analysts also have a Starmine competition (or whatever itâs called now), where one area is recommendation accuracy, with points awarded something like this:
Sell = short x2
Reduce = short x1
Add = long x1
Buy = long x2
These also sometimes seem to guide target prices, when it seems that the analyst âhas to get to an âaddâ recommendationâ or something.
P.S. Mikaelâs message:
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Do you mean that table where risk is horizontal and recommendation is vertical? I hadnât thought of that. But couldnât risk be expressed on its own scale?
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Here, the criteria for the given ratings are explained. My own questioning of the need for the ratings was specifically before this update to the recommendation policy⊠during a time when risk was not included in the criteria.
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Iâll have to check that out. The whole thing just came to mind because of Efecteâs change. There wasnât much thought behind it.
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While recommendations are concise and, from a beauty perspective, like the cherry on top of the analytical cake, they can be misleading on their own. I write this somewhat tongue-in-cheek, but the point itself is all the more serious: without knowing the analysis and justifications themselves, recommendations (and target prices) are meaningless.
I have worked at Inderes for 4.5 years now, and here is a string of different recommendations and descriptions I have encountered so far.
As one soon realizes when reading these, it is necessary to read the analysis or watch the video where the investment target is discussed to find out the ârealâ recommendation.
Note: these are only the recommendations I have observed so far; they are like alien planets in space, meaning more are constantly being discovered over time.
Buy
CONVICTION BUY = The analyst believes 150% in the company and the buying opportunity is genuinely excellent
Buy = Pretty good, read the analysis and consider if it suits your portfolio
Hazard-buy = The company is really risky, definitely not a âbuyâ for everyone
Trap-buy = The analyst tries to lure you into a poor (value) company with a buy recommendation for years
Add
Buy-add = Actually a buy recommendation, but the analyst is being cautious by saying âaddâ. In my experience, this is the best recommendation at Inderes!
Buy, but next quarterâs results will be bad - add = The analyst is playing games and expects the market to react poorly to the next quarterâs bad results, which is why they donât go for a âbuyâ
Add more = Could actually add a little more
Loose add = A fairly common recommendation when the analyst could also be on the âreduceâ side, but a small majority of factors favor a positive recommendation. Very close to a âholdâ recommendation.
Hope-add = The company has previously been on a buy recommendation, but the story and numbers have not developed as expected. The analyst protects their Starmine points by moving to the âaddâ side and hopes that the previously envisioned success will still materialize.
HODL-add = Actually a hold recommendation, but Inderes doesnât have one, so âaddâ
Reduce-add = Poor arguments for a positive recommendation, but the recommendation is still somehow âaddâ
Reduce
Add-reduce = Could actually add, but staff are not allowed to go against recommendations
Hold-reduce = Hold
Lighten-reduce = A good time to lighten up
Sell-reduce = Should actually sell everything, but the analyst avoids too radical a recommendation for fear of some positive surprise
Sell
Hold-sell = Actually just hold good companies in your portfolio
Lighten-sell = Time for a small lighten-up
DONâT TOUCH THIS -sell = The company is as hazardous as radioactive waste and the sell recommendation is a warning sign
Panic-sell = No time to waste, sell as soon as you can
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I disagree to the extent that I claim the large mass of retail investors is guided precisely by those recommendations and target prices, not the text. We ordinary paper hands are quite lemmings and trust that there are good justifications in the background. For a company like Sampo and Fortum, the mere recommendation probably doesnât mean much, but Inderesâs influence on small companies is quite undeniable.
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