📖Li Lu
Position Sizing Discipline
Size positions based on conviction and risk.
The size of your position should reflect your conviction and the risk involved. Never bet so large that a single mistake can wipe out your portfolio.
🏠 Everyday Analogy
📖 Core Interpretation
Li Lu views portfolio construction as risk architecture. Allocation, position sizing, and rebalancing rules determine whether you can stay disciplined across market regimes.
💎 Key Insight：Proper position sizing prevents catastrophic losses.
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❓ Why It Matters
Without portfolio rules, decisions become reactive and concentrated. Sustainable returns come from controllable risk exposure, not one-off bets.
🎯 How to Practice
Set target allocation by risk tolerance, rebalance by rules rather than headlines, and prevent hidden concentration from dominating portfolio behavior.
⚠️ Common Pitfalls
Diversifying superficially without true risk balance
Skipping rebalancing rules and drifting style
Judging portfolio health by short-term returns only
📚 Case Studies
1
BYD Investment Amid Panic (2008)
During the global financial crisis, Li Lu invested in BYD after deep due diligence on technology, management, and unit economics, despite widespread pessimism on autos and China.
✨ Outcome：BYD became a multibagger over the following decade, validating his intellectually honest, evidence‑driven thesis.
2
BYD Early Investment (2004)
Li Lu’s Himalaya Capital invests in Chinese battery and handset maker BYD, recognizing its advantages in batteries, management quality, and long‑term EV potential.
✨ Outcome：Position held and increased; Berkshire Hathaway later invests in 2008, and BYD becomes a multibagger over the following decade.
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