BUILDING A PM PORTFOLIO
Plain English
Single PM trades are gambles; a 30-position portfolio with edge in each becomes an investment. Diversification across event types smooths returns and lets statistical edges materialize.
Going deeper
Build a portfolio by allocating capital across uncorrelated event types: macro (Fed, CPI), politics, weather, sports, entertainment. Cap any single position at 5% of PM capital and any event-type bucket at 25%. Rebalance monthly: reduce winners, fund new edge-positive trades. Track Sharpe ratio (return/volatility) — well-constructed PM portfolios target 1.5+ Sharpe. The biggest mistake retail makes is concentration: dumping 50% into a single 'sure thing' that resolves no.
Examples
Smoothed return curve
30-trade portfolio with 56% win rate at average 1.4R produces a steadily upward equity curve. Same expected value in 5 trades produces wild swings and emotional decision-making.
Bucket diversification
Allocate 25% macro, 25% politics, 20% sports, 15% weather, 15% entertainment. No single news cycle wipes out the portfolio.