Volatility is not our enemy, loss of capital is. This is how we at Karma understand risk. We build the portfolios from the bottom-up, one stock at a time. Rigorous due diligence, focus on corporate governance, management quality and above all, the price you pay for an investment; these define risk.
Stop losses: We admit, and learn from our mistakes. Sometimes we prefer to sell, clear our heads and move on.
Position Sizing: We believe that sizing our positions correctly to account for liquidity, volatility and market capitalization is a basic tenet of risk management.
Ownership Bias: We maintain rigorous risk management throughout the investment process. We actively seek out contrary opinions, and try to rebut rather than confirm our investment hypothesis.
Diversification: Our wide opportunity set increases diversity across sectors and has the added benefit of reduced directional risk. We also examine cross-correlations between sectors to determine the weight of a given economic scenario in our portfolio.