Ask Colin

As your portfolio becomes larger, say several/many millions of dollars, how will that change your ability to easily open and close investments?

Wow! What a great problem to have.

Seriously, this is a good question. In the early stages of such a problem, it will start to limit the size of company you can invest in and even more so if you were a short-term trader. My strategy on size of company is that I can usually get in and out in one lot. That means that there is enough volume near the bid or the offer for me to buy or sell my whole position easily. As my portfolio becomes larger, so some companies will no longer fit this strategy.

The end game in this is the problem shared by most large funds managers. There is only a small pool of companies in the Australian market that they can sensibly buy and sell in. Depending on the policy of the fund, this may be anywhere from 50 to say 300 companies. Many of the larger ones manage this problem by moving part of their portfolio to big overseas markets like the US, Japan and UK.