Emotional Investing - Richard Ralph

What concentrated investing means to me

A concentrated portfolio is not defined by a magic number of holdings. It is defined by whether the biggest positions can materially change the outcome. In my case, Rocket Lab became a position large enough that it could move the main ISA meaningfully in either direction.

I wrote about why I made Rocket Lab roughly 50% of my portfolio because a decision that large should be documented before its outcome is obvious.

The case for fewer, higher-conviction positions

The potential benefit is focus. With fewer businesses to follow, I can spend more time understanding the thesis, the risks and the evidence that would change my mind. That does not guarantee good outcomes. It just makes the decision process more visible.

There is also a difference between diversification and simply owning more tickers. If I cannot explain why I own something, what would invalidate the thesis and what role it plays in the portfolio, the extra holding may not be reducing the risk that matters.

The risks are real

Concentration magnifies mistakes. A missed execution target, financing need, valuation reset or wider market drawdown can hurt far more when a position is large. It can also make ordinary volatility emotionally difficult to sit through.

That is why I do not describe concentration as safe. The point is not to pretend the risk away. The point is to decide whether the potential upside is worth the risk, then keep testing that decision honestly.

My checks before adding to a position

Can I explain the business and the core thesis in plain English?

What would make me reduce or sell the position?

Am I adding because the thesis improved, or because I want a falling price to stop hurting?

Would I still be comfortable owning it if the share price fell further?

Is the position size consistent with the risk I am actually taking?

Document the decision before the result

The most useful discipline is recording why I made a decision before I know whether it works. That creates a more honest record than rewriting a story after a gain, or pretending a loss was unforeseeable.

My monthly portfolio reviews are part of that process. They show what changed, where conviction increased and where I could be wrong. The live Portfolio page shows the current IBKR ISA snapshot separately from the Trading 212 challenge.

This is a personal investing framework, not financial advice. A concentrated portfolio can create large losses as well as large gains.

Some of the best investing decisions I have made look, from the outside, like I did nothing at all.

No trade. No panic adjustment. No clever reaction to the latest headline. Just sitting still while the noise tried to pull me into motion.

That skill did not come naturally. For a long time, activity felt like competence. If markets moved, I felt I should move with them. If a story was loud enough, I felt I needed a response.

Why reaction feels productive

Reacting feels useful because it creates a sense of control. When prices fall or narratives shift, doing something can temporarily reduce anxiety. You feel less passive. You feel like you are managing the situation.

The problem is that not every situation needs management in that moment. Often the better move is to let a well-built plan absorb the noise.

This is closely tied to what I wrote about in what financial independence actually feels like. A lot of progress is not excitement. It is reduced urgency.

When I chose not to act

There have been moments where the urge to act was strong. A sharp drawdown. A sudden narrative change around a holding. A stretch of underperformance that made me question whether patience was conviction or stubbornness.

In those moments, the most valuable question has often been simple: has the long-term thesis actually changed, or has only my comfort level changed?

If it is mostly comfort, reaction is usually expensive.

That is also why I now think differently about volatility. Noise is not always information. Sometimes it is just movement.

What not reacting is not

Not reacting does not mean never changing your mind. It does not mean ignoring risk. It does not mean defending a bad position out of pride.

It means creating space between stimulus and decision. It means refusing to let temporary emotion pretend it is analysis.

That distinction matters. Blind hold is not wisdom. Deliberate non-reaction is.

How I try to practice it

I revisit the original thesis before making changes
I ask whether new information is actually new
I separate price movement from business quality
I give myself time before acting on discomfort

This is one reason I care about process tools as well as holdings. Cleaner portfolio context, research discipline, and fewer impulsive inputs all help. That is part of why I keep a public Investment Portfolio and why I review the tools around my process in Tools & Reviews.

The real power

The quiet power of not reacting is that it protects compounding. It protects judgement. It protects you from turning temporary discomfort into permanent mistakes.

I still get the urge. I still feel the pull. But I trust the pause more than I used to.

If you want a related story on how close I came to doing the opposite, read When I Almost Sold at the Worst Possible Time.

I share more of this day-to-day thinking on X. For broader money reading, see Wealth Resources.

Tag: Emotional Investing

Concentrated Investing: Conviction, Position Size and Risk