Position Sizing: How Much to Invest

How Much Should You Put in One Stock?

Position sizing is deciding how much of your money to allocate to a single stock. Getting this right is crucial for managing risk.

Rules of Thumb

• Never put more than 20% in one stock — Even if you love the company
• Invest only what you can afford to lose — Stock prices can drop
• Keep an emergency fund first — 3-6 months of expenses in savings

A Simple Framework

Monthly income: KES 50,000

• Expenses: KES 35,000
• Savings (emergency fund): KES 5,000
• Investable amount: KES 10,000/month

With KES 10,000/month, you could buy shares in 2-3 different companies, building diversification over time.

Start Small, Add Regularly

You do not need to invest a large lump sum. Investing a fixed amount regularly (called "dollar-cost averaging" or "shilling-cost averaging" in Kenya) smooths out the effect of price fluctuations.