I like to think about managing my portfolio like an NBA GM thinks about managing his basketball team.

Here is how

Warren Buffett has said if you have LeBron James on your team, why would you invest your money into anyone else? If I have a stock that I am so bullish on that I would call it the "LeBron James" of my portfolio, then that stock should be my #1 position.

Likewise, if an NBA team has a player they think is as good as LeBron, they will pay him more than anyone else. Nevertheless, an NBA team with just LeBron is not going to win a championship; he needs a supporting cast.

If LeBron gets hurt, or if he stops scoring as much as he gets older, or he has a bad game or a bad season, his team needs other players to pick up the slack. For his team, then, the GM needs at least five solid starters to have a chance at winning the Finals.

With my portfolio, the same is true. $TTD is currently my #1 position, and I am very bullish on it over the long term. However, I want other high-quality stocks in case $TTD falters, has a bad quarter or year, or faces an unanticipated challenge.

For me, these other "starters" are $MELI, $AMZN, $NVDA, and $SQ. With just this team of five stocks, I believe that my portfolio could thrive over the long term. They are five of my largest positions, and each can hold its own as a major portion of my portfolio.

Even if an NBA GM loves all five of his starters, as I do my top five stocks, he doesn't just sign five players. He signs the team's bench players too, who come in and score when the starters aren't performing, and in time, and may replace the starters.

For me, it makes sense to have some large "bench" positions. These are companies whose fluctuations I want to materially affect my portfolio, but I not confident enough in them yet to make them starters. One day, I hope some of these companies will become starters.

My bench includes: $SE, $CRWD, $DOCU, $ETSY, $RDFN, and more. For me, it makes sense for these companies to be young & growing quickly. Some veterans are nice to stabilize your team (or portfolio), but I find little value in a 1-2% position in a company that may 2x over time.

Instead, just as NBA teams have draft picks each year, in which they pick players that they hope can one day become superstars, I have some young, exciting companies as a part of my "moonshot" portfolio.

With draft picks, NBA GMs are faced with an interesting dilemma. Theoretically, a team wants as many draft picks as possible. Young talent can energize a team, and drafting more players gives you a better chance of picking a future star, who can provide years of winning seasons.

At the same time, however, teams may be better served by spending their time deeply analyzing just a few players for their few picks, rather than drafting more, less-scouted players.

In the scenario where the team has more, less-scouted picks, they may end up with a star, but they also might end up with all busts, wasting their picks. When the team picks just a few potential superstars who they have studied more, they may increase their odds of having a star.

When it comes to stocks, therefore, it definitely makes sense to have some small "moonshot" stocks that could one day become your portfolio's LeBron James. However, it is logical to allocate towards these positions as if they could bust, not as if they are LeBron.

For me, these positions include $DKNG, $NNOX, $SPCE, and others. Although they may not all be long-term winners, I have studied these companies deeply, & I believe each could be a future star. Even so, none of them makes up a substantial % of my portfolio currently.

Next, no NBA team sets arbitrary limits on their number of good players. Sure, teams have roster caps and finite amounts of money, but no good team with the resources to add a great bench player who they believe could play a valuable role is going to turn them down.

Likewise, as an investor, it does not make sense to set arbitrary limits on the number of companies in your portfolio. One should definitely have some sort of target number, so he or she does not just blindly invest in companies and dilute the value of his or her starters.

However, if I set a target of 15 and an excellent 16th stock comes to my attention, there is no reason to turn it down, solely to keep my portfolio at 15. Nobody should stretch beyond their limits, but a great player with high growth potential is always worth considering.

Finally, NBA GMs study & sign new players almost every year. The best teams don't necessarily have high rates of turnover. If you have the best player, there is no reason to let him go. Over time, however, players get old and need to be replaced, as they no longer can perform.

With a portfolio, the same is true. It makes sense to buy and hold those top companies over the long-term, only selling when they can no longer perform (i.e. the thesis is busted). Moreover, a wise investor studies new stocks and new strategies, adding new companies over time.

Hopefully, my portfolio will never need a full rebuild, but thinking about it in this way helps me understand the roles of my different companies and make smart decisions when it comes to allocating my money.

Thank you so much for reading! Would love to hear thoughts on this!