Jasz
VIP Contributor
An investment approach known as the anti-Martingale method doubles the position sizes of assets that experience gains. Investors would overweight their profitable investments employing this strategy in the hopes that they will keep rising. As an example, if you have $10,000 and you're invested in a portfolio of 10 stocks with a dollar cost averaging strategy, and one stock rises from $8 to $10, your portfolio will be worth $20,000. In this case, your risk is $10,000 ($10,000 of your initial investment) and your return is 20%. So if you leave the stock alone and do not sell it or add more shares to your portfolio, you will gain 20% on your original investment.
If another stock goes up from $8 to $9 and then drops back down to $7 again (and therefore loses 25%), then your portfolio will go down by 25%. But because you're holding 10 positions rather than 5 positions like before (because of the doubling effect), this means that instead of losing 10% during this time period (which was what happened when one loss occurred), you now only lose 5% over that time period instead of losing 10%.
If another stock goes up from $8 to $9 and then drops back down to $7 again (and therefore loses 25%), then your portfolio will go down by 25%. But because you're holding 10 positions rather than 5 positions like before (because of the doubling effect), this means that instead of losing 10% during this time period (which was what happened when one loss occurred), you now only lose 5% over that time period instead of losing 10%.
