A core principle of the Tactical Growth portfolio is risk management. The idea is that I only want to be invested in a stock when it’s going up, naturally. But, equally important is cutting a stock loose when the stock isn’t behaving as it should.

A well-known market darling in Canada during the COVID-19 pandemic was Shopify (SHOP-T). During 2020-21, it had grown to be the biggest company on the Canadian stock exchange. You would assume the biggest company in Canada would be a safe investment, but even big companies can fall. Shopify fell 84.8% from peak-to-trough. If that was a big part of your portfolio, then 2022 really hurt.

Managing risk doesn’t mean avoiding it. It simply means acknowledging that I won’t get every trade right, but admitting a mistake quickly will prevent it from snowballing into a really big mistake. In a good market, the winning trades will be allowed to run and outpace the small losses incurred from the trades I got wrong. When you look at stock investing in this fashion, risk can be measured.

In 2022, I made 154 purchase orders in this mandate. I didn’t get all of those trades right, not even close. However, by managing risk appropriately, I was able to cut the losers and let the winners run enough to generate a good year for the portfolio.