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.
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.
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.
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.
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.
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?