Rather than making a large initial bet, follow the VC model of making a small investment first. Only increase your position size once the company has proven its model, reduced technological risk, or solved major distribution challenges, effectively de-risking the core thesis.

Instead of making large initial bets, a more effective strategy is to take small, "junior varsity" positions. Investors then aggressively ramp up their size only when the thesis begins to demonstrably play out, a method described as "high conviction, inflection investing."

Many investors wrongly equate high conviction with making a large initial investment. A more evolved approach is to start with smaller at-cost positions, allowing a company's performance to earn its eventual large weighting in the portfolio. This mitigates risk and improves decision-making.

True understanding of a business often comes only after owning it. Taking a small (e.g., 1%) starter position can initiate the research process and shift your perspective from a casual observer to a critical owner, revealing nuances and risks not apparent from the outside.

Instead of using an arbitrary percentage, Gorham Thomason of AKO Capital determines maximum position size based on a stock's liquidity. This ensures the fund can exit a large position without crashing the share price if the investment thesis sours, providing a practical risk management framework.

Smaller initial positions can generate better returns because investors are less emotionally attached. This distance allows the investment thesis the time it needs to mature without being derailed by over-analysis of every minor news event or price fluctuation.

By seeding new positions at ~0.5% and rarely exceeding 1% at cost, the fund mitigates the behavioral risk of averaging down too aggressively into a failing investment. This disciplined approach prevents a small mistake from becoming a large portfolio loss.

A powerful risk management technique is setting a maximum percentage of your portfolio that can be invested in a single stock *at cost*. A 5% at-cost limit means once you've invested 5% of your capital, you cannot add more, even if the stock price plummets and its market value shrinks. This prevents chasing losers.

To avoid emotional decision-making, especially with losing positions, write down the specific criteria for any investment. Then, backtest those rules against historical data. This replaces emotional struggle with a systematic, data-driven process.