My maths leaves a bit to be desired...LOL
65% + 25% + 15% doesn't equal 100% but it's close enough and it is a moving feast, I'm sure you all get the idea.
UW
there is plenty of research that shows around 35 is about the optimal number for a fund, that is, for example a Australian equity portfolio designed to outperform a broader index such as ASX200. almost all the intitutional portfolios i have been involved with that have this objective were 30-45 stocks. of course it depends what your objective is.
I've always found Portfolio Management to be a very interest ing part of investing. It can be all things to all people and is a very individual thing. I doubt there is one size that fits all and it is ever evolving, on my part at least.
The ideal number of companies to hold is a question that I have considered and grappled with and changed my mind over many times through the years.
I've switched between running a concentrated high conviction Portfolio of about 14 or 15 stocks to a larger portfolio containing my core holdings plus a selection of more speculative companies that I consider have potential. For a time I think I went too far and went "searching" for too many companies and couldn't keep up. Usually reporting season is a good indicator of whether you can manage the number of companies you own or not!
These days, I think I've settled on an Investment Triangle approach were my long held high conviction holdings account for approximately 65% of my PF or about 15 companies, a second group of promising companies that I don't know quite as well but am learning more about all the time say, 25% of my PF or about 5 or 6 companies and finally, the remaining 15% which are more speculative and risky in nature. Somewhere around 10 to 12 companies though this can vary.
What I'll also say is that these days I think I'm a better investor than I once was and more capable of holding more companies. Not sure how Peter Lynch held so many companies and still showed a clean set of heals. I guess he is a genius
I only build a larger position as I learn more and as my conviction grows.
This strategy is something I've arrived at over the years and probably more suitable to an investor that has held their core holdings for some time and has a good understanding of them.
I didn't start taking positions in more speculative stocks until I felt comfortable with those core holdings.
I accept that more times than not many of my speculative companies won't come to anything but you only need one or two of them to go on and they can make a huge difference to your financial position.
I've held, XRO, PME, NAN, ALU & a few others for 5 or 6 years from when they were much smaller and riskier so these small unknown speculative stocks can grow into something that can change your life.
I have trimmed my core holdings in recent times to accommodate my ever evolving investment strategy and build an appropriately sized position in what I hope will be the next generation of WAAAX stocks. Who knows how I'll be thinking about that in 1, 3 or 5 years but I know one thing and that is I will be thinking - hopefully!
If there was one bit of advice I'd like to give my earlier self, it would be to be patient - the opportunities will come.
How many stocks? 77, of course. But only if you have the time to follow all of them. And I don't, so for me, around 20 to 30 is ideal I find, but if I had less time to spend following those companies, I would likely reduce that to about 10 to 15. If I didn't have time to follow 10 to 15 companies closely, I would likely opt for a couple of well-chosen ETFs. Other than ETFs and some very high quality LICs, there are very few companies that are set-and-forget, or "bottom draw stocks" these days. I find that all of my direct investments need to be monitored closely, although some certainly require closer scrutiny than others. The greater confidence you have in a company's management, the longer the leash can be.