Aggressive Investor: Biotech Severely Overweight

POSITION SIZING CHECK
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Stock: Small Biotech
Type: Speculative
Your Risk Tolerance: Aggressive

RECOMMENDATION:
Maximum Position Size: 8% of portfolio ($40,000)
Your Current: 24% of portfolio ($120,000)

Status: TOO LARGE

⚠️  TRIM POSITION: Reduce by $80,000 (sell 2/3 of your holding)

WHY THIS MATTERS:
You're right to be concerned about concentration risk. At 24%, this single biotech stock represents nearly a quarter of your entire net worth. Biotech stocks are inherently binary—clinical trial results, FDA decisions, or funding issues can send them to zero overnight.

Even as an aggressive investor, the maximum recommended for speculative stocks is 8% ($40,000). Here's the reality:
- If this stock goes to zero (not uncommon for small biotech), you'd lose $120,000—24% of your savings
- At 8% ($40,000), a total loss would be painful but recoverable
- The difference between losing $40K vs $120K is life-changing

Your concentration risk is 3X beyond the aggressive investor threshold.

NEXT STEPS:
1. **Sell $80,000 worth immediately** (reduce from $120K to $40K)
   - Consider tax implications—review your cost basis and capital gains
   - If the stock is volatile, consider spreading sales over 2-4 weeks to reduce market impact
   
2. **Redeploy the $80,000 across 5-7 different investments**
   - Target different sectors (avoid more biotech concentration)
   - Mix of blue-chip and growth stocks
   - Example: $15K each in 5 positions, plus keep $5K in cash

3. **Apply the "sleep well" test**: If this biotech announced a failed trial tomorrow and the stock dropped 70%, would you be okay?
   - At $120K position: You'd lose $84,000 (17% of net worth)
   - At $40K position: You'd lose $28,000 (5.6% of net worth)
   
4. **Set a calendar reminder** for quarterly rebalancing—if the remaining $40K position grows beyond 10-12%, trim it back to 8%

The hardest part: If you've made gains on this position, selling feels like "giving up upside." But remember—preservation of capital matters more than maximizing every opportunity. You can still benefit from a 10x gain on $40K ($400K profit) without risking your financial security.