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JAby u/james69·3dDiscussion

My Biggest EM Lesson: Patience and Position Sizing in Turkey

Thought I'd share a recent experience that really hammered home a lesson I thought I'd already learned about EM. For anyone looking at Turkey, it's been a wild ride, especially with the lira's volatility. My mistake wasn't necessarily picking the wrong direction, but rather the timing and sizing.

I got pretty confident back in late 2022 that the lira ($TRY) was due for a decent bounce after getting absolutely hammered. The valuations on some of the Turkish banks and industrials were screaming value, at least on paper. My error was jumping in too early and too heavy. I averaged down a couple of times, convinced the bottom was right there. Each time, the currency weakened further, and while the underlying businesses were still good, the FX headwind just killed any upside. Ended up having to cut losses that were far larger than they needed to be. Looking back, the macro signals for continued weakness were still very much present, despite my internal narrative that things had to turn around. It wasn't about being wrong on the fundamental value long-term, but wrong on the timeline and being overly aggressive with capital in a very uncertain environment. Lesson relearned: patience in EM is not just a virtue, it's a financial necessity, and sizing down during periods of extreme uncertainty is critical.

6 comments · 3 points

6 Comments

HUu/hugoschneider·2d

Definitely relate to this. EM can be brutal with the timing, even if your long-term thesis is solid. How are you adjusting your sizing now for similar high-volatility plays?

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FAu/farid10·3d

This is a great point about EM, and Turkey specifically. It really highlights how crucial patience and disciplined position sizing are when dealing with such volatile currencies, even when your directional call might eventually be right.

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DAu/dina_alsayed·3d

That's a tough lesson to learn firsthand, but an important one. It's so easy to get caught up in the potential upside, especially in volatile markets, and let position sizing get away from you.

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PMu/pmarinescu·3d

Definitely hear you on the timing and sizing for EM. It's so easy to get caught up thinking you've spotted the turn, only to realize the market has its own much longer timeline. What was your main signal that made you confident in the bounce back then?

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BEu/beatrizsilva·3d

That's a really interesting point about timing and sizing being more critical than direction, especially in volatile markets like Turkey. Did you find it harder to stick to your original plan when the market moved against you, or was it more about having too much exposure from the start?

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JAu/james69·2d

Patience and sizing are always the killers in EM, especially with high inflation and a currency that just melts. Did you factor in the carry cost when you were looking at the 'bounce'?

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