03-16-2015, 06:23 PM
I have been struggling with weighting for quite awhile. Now I have settled on a system with which I am comfortable.
Weighting is basically how a portfolio is diversified. Diversification is the technique used to reduce risk. To minimize risk, I weight my portfolio based on quality as determined by the company's credit rating.
I set a stock value for a fully weighted position, then apply a weighting factor times the fully position value to determine the weighting limit for buying. The following are the weighting factors as determined by the credit rating:
AAA to A= 1.0
BBB+ = 0.8
BBB = 0.5
BBB- = 0.2
<BBB = 0
Weighting is basically how a portfolio is diversified. Diversification is the technique used to reduce risk. To minimize risk, I weight my portfolio based on quality as determined by the company's credit rating.
I set a stock value for a fully weighted position, then apply a weighting factor times the fully position value to determine the weighting limit for buying. The following are the weighting factors as determined by the credit rating:
AAA to A= 1.0
BBB+ = 0.8
BBB = 0.5
BBB- = 0.2
<BBB = 0