How many stocks should you own?

How many stocks an investor should own is completely dependent on his or her goals. 10-30 stocks is the range you should be in. Under 10 you have the risk of not being diversified enough (higher risk) and over 30 can make you too diversified which can also lead to long term profit loss. For most investors 10-20 is a comfortable range. As long as your investing in strong business the risk can be mitigated. It’s more beneficial from my point of view once your diversified to reinforce your positions rather than picking new stocks to buy. More shares equal more dividends which can allow more DRIP (dividend reinvestment plan) to occur. Dividends paid over time compound and grow your portfolio over the long term. Starting out will be slow, but as your positions increase the higher rate of compounding will take effect and grow enormously. For example, I bought an ETF not too long ago for 10 shares and the quarterly dividend just reinvested and now I own 10.157. As you increase your position you will eventually have an extra share you didn’t have before, and so on. Reinforcing positions instead of buying new stock will exceed that rate of growth exponentially. If you can dollar cost average effectively buying more shares will provide better security in the long term. Owning 30+ stocks and constantly buying new positions can cut down on that growth. At least once a year if not more you should be reevaluating your companies to make sure they are still healthy and stable. If you find the value may be too high you can either sell and reinforce other positions or find a new business to invest in. Every situation differs but ultimately your time and effort will be the cause for your future portfolios success. All of this being said you still want to invest in different industries and sectors. If you have all your eggs in one basket and that sector takes a crash your entire portfolio will be affected massively. There’s no right or wrong. Plenty of investors out there have less than 10 and more than 30, this is just the recommend amount based on research. My current position size is 14. I may buy a few more or less depending on current valuations, but I always have my stronghold of specific stocks and ETFs that I will never sell. Since you should be reevaluating your picks on occasion it’s a lot easier to research 10-20 of your holdings than 30+. At 30+ you have a higher risk of letting failing companies slip through the cracks and bring down your portfolio. Most of my positions are blue chip dividend aristocrats and kings which are extremely safe, but of course never guaranteed. Dividend investing is not a get rich fast strategy, but if you have time on your side it has been proven to be successful. Eventually these dividends will allow you to earn a passive income and can allow financial freedom which I think we can all agree is the ultimate goal. Remember, you only lose if you sell. Invest with a margin of safety, dollar cost average, and do all of the research yourself before buying a business.

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