Portfolio Risk & Fit
If this goes to zero, does the account still work?
This is the tool version of step 8 on How to Research a Stock and section 8 on the checklist. You can do that step with a brokerage screen and a number. Framework 06 is for when you want the same question run against the name plus a structured look at concentration and what you already own.
When to run it
- After the thesis and invalidator exist (Framework 05). Not before.
- Before you add to a name that already worked.
- When the ticker is already inside an index fund you hold and you are about to buy it again on purpose.
Do not run Framework 06 to talk yourself into a larger lot. If the write-up is used that way, throw it out.
What the write-up is supposed to contain
A Framework 06 output should force these onto the page:
- What percent of invested assets this would be
- Whether you already own the same bet under another ticker or a broad index
- What else in the account moves with this name
- A max size written as a number, not a feeling
- What happens to the account in a bad tape if this lot is that size
If the output is "reasonable addition to a diversified portfolio" with no percent, the run failed. Write the percent yourself.
What this framework cannot do
- It does not tell you whether the business is good. That was Framework 01 and Framework 05.
- It does not tell you whether the price is fair. That is Framework 03.
- It does not pick the stock.
- It does not promise how the position will behave next month.
- It does not replace the Position Size calculator if all you need is shares-from-risk-percent arithmetic.
A beginner cap that survives contact with real life: a few percent of invested assets, not half the account. Half the account is not conviction. It is a hole.
Where 06 sits in the sequence: Which Framework, When?
Walkthrough: AMZN as a first 06
Notes a first fit pass should produce — not a model portfolio
- If the account already holds a total-market or S&P 500 fund, AMZN is already in the account. A separate lot is a concentration decision.
- The question is not "do I know Amazon." The question is "how much extra Amazon do I want on top of the index."
- Two things that move together: the store/ads side with a consumer tape, and AWS with cloud-capex sentiment. A 06 pass that treats AMZN as one isolated widget is incomplete.
- Max-size draft for a first individual add: small enough that a 50% drawdown is uncomfortable and not existential. Write the number before the order ticket.
Still open after a 06: the exact percent I would use in this account tonight, because that number depends on cash, debt, and what else I own — not on a generic write-up. Also still open: whether 03 and 04 were actually finished. Size on top of a slogan is just a bigger slogan.
Handwritten version: How to Analyze a Stock, section 8.
Full published run: AMZN analysis.
Do it yourself, then run 06
Before you spend a credit:
- Thesis + invalidator written (checklist section 7). If those lines are blank, stop. Go back to Framework 05.
- List what you already own. Circle anything that is the same bet.
- Write a max percent. Use the Position Size calculator if you want dollars and share count from that percent.
- Cover the ticker. Read the percent out loud. If you flinch, it is too big.
Then run Framework 06 and see whether the write-up names a correlation you missed.
If there is no individual stock yet — only the default index — you do not need this framework: How to Start Investing.
Common questions
I only own one index fund. Do I still run 06?
Only if you are about to buy a single name on top of it. The index is the portfolio. 06 exists because the single name changes that.
The write-up says the idea is high conviction. Can I go bigger?
No. Conviction is Framework 05. Size is a separate decision. High conviction plus 40% of the account is how people turn a good idea into a life event.
What do I run next?
Stop. Or Framework 13 if the thing you actually worry about is rates or a recession hitting this lot. Do not run the rest to postpone writing the percent.
Run Portfolio Risk & Fit
Same demand as checklist section 8. A structured look at concentration instead of a blank page. This is the optional faster pass — not a substitute for a max size written before the order.
Try AlphaLens Free → Use code REDDIT-FREE-TRIAL · No card required · Then $39/mo or $299/yrThen close the laptop, or write the percent and place nothing tonight.