2% Rule

A semi-random investing rule that limits investment to no more than 2% of a given portfolio in any one security. The goal is to lesson shocks to the portfolio by forcing diversity and exposure to a wide range of investments. The problem: it encourages a portfolio to sell their winners (i.e. if they pierce 2% because the stock does well, that security has to be sold so that the overall position winnows down to 2%), and buy more of their losers. The result is often APOC (a portfolio of crap).