"Establish your sleep number, know your sleep number, be awake to the possibility that your sleep number may change over the course of time."

Sleep Number - The Highest percentage allocation you are willing to allow a single position in your portfolio to reach.

Example: You have a 20 Stock portfolio. Amazon is your largest position and represents 17% of your portfolio. Your portfolio currently has a sleep number of 17.

Using our Amazon example, ask yourself, "How comfortable am I with 17% of my portfolio in one company? Will a position this size cause me to lose sleep?"

There are two possible answers:

1. It makes me uncomfortable. I'd like it to be 10% of my portfolio. In this case, you establish a sleep number of 10 and need to sell until you are down to a 10% position.

2. I am ok with 17%. I'd be ok if it reaches 20. You establish a sleep number of 20 and don't need to make any moves in this case.

Establishing your sleep number, in the beginning, is a trial-and-error process.

I initially set my sleep number to 50. Then I had a holding reach 30, and it made me nervous. I adjusted my sleep number to 25. You won't know your sleep number until you get to that point.

Abiding by your sleep number allows you to ...

• Lower your stress level

• Remove emotions from the decision-making process

• Maintain diversity in your portfolio (Unless your sleep # is 100 😲)

It's important to revisit your sleep number every couple of years and make adjustments based on your financial situation and stage of life.

"Establish your sleep number, know your sleep number, be awake to the possibility that your sleep number may change over the course of time."

References:

6 Principles of a Rule Breaker Portfolio