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Managing Your Portfolio: How Many Stocks Should You Own?

A few days ago while my husband was watching interminable football game (after game, after game), I was scrolling through various financial sites and came across some interesting articles asking how many stocks should you own in your portfolio.

Some advisors say no more than 10. Some say that 20 to 25 would give good diversification and spread out risk. Others claim you need at least 50 or 60 stocks in your portfolio.

Related: How much does it cost to build a portfolio of individual stocks?

A poll conducted by Morningstar shows that the median number of holdings is 29.

I checked my statements and found that, in my three accounts, I own:

  • 19 individual dividend-paying stocks
  • 2 REITs
  • 7 mutual funds
  • 4 ETFs

I’m told that I need to spend too much time doing my homework – becoming aware of developments that impact the companies and the sectors they are in, but I’ve had most of these investments for quite some time and I’m happy with their performance.

I find I don’t need to delve into the minutiae of each company on an ongoing basis to understand their future prospects.

How Many Stocks Should You Own?

Sorting through the hype

Research is one thing I dislike doing, so I love reading articles written by people who analyze different companies and sectors and come up with their own best results.  They have titles like:

  • Top 10 High Dividend Paying ETFs
  • 10 Best Growth Stocks
  • 5 Best Mid-Cap Stocks
  • Warren Buffet’s 16 latest buys
  • 10 Best Mutual Funds

I end up with lists and lists of intriguing possibilities, but when it comes down to making the final decision I realize I have a limited amount of money to invest, and I need to stick with my core investment plan.

Related: Is it time to say goodbye to dividend investing?

I can’t go running off in all directions investing (or speculating) in every stock or fund that someone has recommended.  Some people collect investments and forget what their original goals were.

I do my own research on a company or fund I’d like to add, or just buy more of some of my existing holdings. My investment style may not suit others – and I respect that – but it works for me.

Diversification

I suppose the real question is – How diverse are you?

Canadian stocks, especially dividend payers, are limited to just a few sectors – financial, utilities, telecoms and resources.  Owning all the banks or telecoms, for example, gives you a number of stocks but not much diversity.

Related: Do you suffer from home country bias? 

If you own several mutual funds or ETFs you can easily have many duplicate holdings.

How many stocks should you own?

Benjamin Graham (The Intelligent Investor) says the magic number is somewhere between 10 and 30. 

Every investor will come up with an answer that suits his or her particular situation.  As your portfolio grows do you add to what you already have, or do you buy something new?

How many stocks (or funds) do you own?  Are you satisfied with that number?  Why or why not?

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14 Comments

  1. Lance on October 7, 2014 at 8:17 pm

    I stopped with individual stocks a while back. I thought I had hit it big with Apple back in 2000 when I graduated school. I bought in and then sold when the stock doubled after the iPod came out. I figured that was as good as it gets. If only I had held on to it. Been a long-term investor in low cost mutual funds ever since.

  2. Dan @ Our Big Fat Wallet on October 7, 2014 at 8:20 pm

    The number of stocks you own can be a reflection of where you are in your investing timeline. For me, I am relatively new and own about 8 but plan to increase that in the future. I tend to favour dividend stocks because I like the cash flows they provide. And in the future I also plan to put some money into index funds so that I can become even more diversified (at a low cost)

  3. My Own Advisor on October 8, 2014 at 4:48 am

    I own about 25 stocks in Canada, about 10 from the U.S. They all pay dividends. I also own about 5 REITs, all from Canada. I try and run synthetic DRIPs for as many holdings as I can.

    In addition to that I own 3 ETFs. No mutual funds.

    In terms of “enough” stocks and individual companies, I think I have that but I’m not as diversified (as I could be) outside of Canada. This is where I want to index invest more, counter-balance any risk that comes with owning individual stocks.

    My portfolio has some work to do but it’s getting there.

  4. Grant on October 8, 2014 at 7:24 am

    Larry Swedroe says you need 100 large cap stocks to be properly diversified, and many hundreds when it comes to small cap stocks.

    I, too, don’t own any individual stocks, just a few ETFs to get global diversification. That way I don’t need to spend any time researching stocks, just a few minutes once a year rebalancing the portfolio.

  5. Ian on October 8, 2014 at 8:14 am

    I think the number of stocks depends on whether the are correlated which is a big exposure if one is invested in dividend paying stocks. An example portfolio of ten stocks say the 4 banks 2 telecoms a couple of insurance companies and two pipeline companies would not be diversified enough. One would need more like 25 stocks including some non dividend paying and US stocks to get properly diversified.

    It could be argued that many ETF’s of Canadian stocks are not properly diversified even if they have 25 holdings because the Canadian market is so narrow

  6. Grant on October 8, 2014 at 8:23 am

    Ian, a broad market Canadian ETF such as XIC has 252 holdings, but I agree the Canadian market is very small (about 4% of the world market) which is why one needs to be diversified into the US and international markets as well.

  7. Janine on October 8, 2014 at 1:22 pm

    I have about 20 single stocks in my portfolio and I think that’s around the right amount. I feel like with this amount I can dip my toe in a lot of industries which as a well diversified investor is important.

  8. Ashley on October 8, 2014 at 2:34 pm

    I’m starting out, and will slowly build my stock portfolio for long term dividend paying stocks. I hold 3 US and 2 Canadian stocks, a small TSX 60 ETF, a global equity ETF, and a conservative, strong, though expensive mutual fund. With my wife and I’s strong pension plans I feel it is okay with this RRSP to stay far far away from fixed income while interest rates are so low. I feel badly for seniors having to rely on GIC’s, bond funds and ETF’s right now, bad story.

    When money permits within 6 months I hope to add a Canadian bank for the long term if price for one of them is reasonable. If not I’ll look elsewhere. September was my first month ever with multiple dividends, that was nice.

  9. Gary on October 9, 2014 at 7:40 pm

    ok marie here it is: i own 9 canadian stocks, 6 american stocks and 2 bond etf’s. as you know i’m retired so i need income. each year we sell a bit to top up our retirement income but that what it’s for — RIGHT! i’m a little surprised you still have mutual funds?

  10. Sean Cooper, Financial Journalist on October 9, 2014 at 9:10 pm

    I’m a big fan of the TD e-Series. Once my mortgage is paid off and I start contributing to my TFSA again, I’ll consider bluechip stocks. The Canadian banks seem like a good place to start. There’s no way I’m going anywhere near volatile stocks in the high tech industry like BlackBerry or Apple!

  11. Robert on October 10, 2014 at 9:53 am

    I figure in stocks you need enough that you do not panic when one falters badly. However if a large proportion of one’s holdings are mutuals and ETFs this would not be a big issue.

    I have 20 holdings including a mutual, 4 REITs and 2 income trusts. I have 4 US stocks, 3 are blue chips.

    Having said that it means little without knowing my allocations. I certainly have too much in one REIT and it makes my others look small. I am actively working on changing that.

    I think if someone is retired and has equal holdings in 10 or 12 large cap stocks that are non-volotile it just might hold for life. It is one scenario I consider for down the road when I don’t want to monitor things any more.

  12. Chris on October 10, 2014 at 12:25 pm

    I think this has a lot to do with your comfort level as an investor, your age/investing time horizon, your investment goals, your interest/ability/time etc. I personally have about 20 stocks in the RRSP, 5 in TFSA, 10 non-registered, so about 35 total. My stocks are almost exclusively Canadian companies, but I think I’m ok, as a number of these companies are larger and do international business. So Husky,Sun Life and Fortis for example may be Canadian, but do business worldwide. Some smaller caps and mid-caps as well (including Prism Medical, which although it’s not large does a great deal of business in the US and UK). I’m probably a little too heavy in insurance, but that’s because I understand the business and bought in when the valuations were too good to be passed up (2009). Also own a fair chunk of Telus as I worked there, so was a employee stock purchase plan, and I hold those shares and love collecting the dividends. I think the argument that Canada is only 4% of the world market is not valid – this is where I live, I know the companies and spend the currency, I feel I can have faith in the market etc. Some worldwide diversity is good, but many Canadian companies sell to the world, so I consider these to be international from a diversification perspective.

  13. Rich on October 13, 2014 at 9:37 am

    We are retired with an adequate pension and some RRSP money to tap in the future. I have 20 Canadian dividend stocks in our cash account. This is not enough diversification for the reasons stated in other replies but it is all I can reasonably follow at one time and also all that Canada offers that I am eager to own. I try to add diversification with U.S. and international E.T.F.s in our T.F.S.A.s.

  14. david smith on December 28, 2014 at 11:21 pm

    I bought 26 of the 30 dow jones stocks and have added 1 stock monthly over the past 3 years based on value. 95 percent of my holdings are from the forbes fortune 500 list, adding a new one when price takes a dive but the value is still there.

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