Portfolio allocation

1. Equal-Weight Allocation

• Method: Each stock (or asset) gets the same weight.

• Example: For 7 stocks, each is ~14.3%.

• Pros: Simple, avoids over-reliance on one name, naturally forces trimming winners and adding laggards.

• Cons: Ignores fundamentals, risk, or market cap size.

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2. Market-Cap Weighting (Passive Indexing Style)

• Method: Allocate by market capitalization, like the S&P 500 does.

• Example: Today, NVDA, MSFT, and AAPL dominate; Tesla has smaller weight.

• Pros: Reflects “real world” index investing, aligns with institutional benchmarks.

• Cons: Concentration risk (Mag 7 already ~30%+ of S&P 500).

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3. Fundamental Weighting

• Method: Allocate by fundamentals such as revenues, earnings, or free cash flow.

• Example: Assign weight proportional to last 12-month revenues or net income.

• Pros: Aligns weights with business strength, not just stock price.

• Cons: Backward-looking; may underweight fast growers (e.g., NVDA).