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Member
How many direct holdings in a portfolio
I have over 40 different companies in my Australasian component of my portfolio. I think this is far too many. What is the optimum number for direct share holdings?
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If you ain't going to say why
Originally Posted by voltage
I have over 40 different companies in my Australasian component of my portfolio. I think this is far too many. What is the optimum number for direct share holdings?
42
Best Wishes
Paper Tiger
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somewhere between 18 and 25 is about the optimal amount.
Diversification Capture.JPG
For clarity, nothing I say is advice....
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I hold 3 currently and not interested in holding many more than that.
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Originally Posted by couta1
I hold 3 currently and not interested in holding many more than that.
says the undisputed champion of non diversification ...
Its kind of like being a climate change denier, some people see the weather getting warmer, some getting colder, it depends where you are.
But science, says that diversification is the only free lunch. And the amount of free lunch depends on how many stocks you hold. The reason its not ∞ is because that is cumbersome and marginal returns are diminishing so a healthy balance says 18 -25.
42 is probably too many, but 3 is definitely not enough , though even with 3 there a significant decrease in risk from holding only one stock. But there is definitely less risk (for no decrease in expected return, and marginal extra effort) by holding a few extra shares in the portfolio.
For clarity, nothing I say is advice....
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Member
thanks for the comments, I do think 40 is too many, you get to the stage where you might as well hold an index fund
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My wife's portfolio is made as follows.11 high conviction NZ listed companies,1 Unlisted company,and 1 traded via the company,and 1 DD [dead duck] in Aussie..
My portfolio is made up of 10 NZ listed companies,1 unlisted company and 1 traded via the company.In Aussie I have 3 reasonable holdings,6 smaller holdings and 15 high risk and 6 DDs.
We both hold 6 of the high conviction NZ stocks,and we both hold the unlisted stock,and the one traded via the company.
I run our portfolios with large holdings in high conviction companies,smaller amounts in companies that appear to be worth while, and very small amounts in very higher risk companies.
So about 65% in high conviction companies, and about 25% in companies that look worthwhile,and approx 10% in higher risk companies.
I achieve good dividends and solid share price growth from the high convicton and worthwhile companies, and have some serious fun with high risk ones,.!
My broker says I am very conservative with my wife's portfolio, and rather aggressive with my own.!
Last edited by percy; 29-03-2017 at 10:00 PM.
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Originally Posted by percy
My portfolio is made up of 10 NZ listed companies,1 unlisted company and 1 traded via the company.In Aussie I have 3 reasonable holdings,6 smaller holdings and 15 high risk and 6 DDs.
Thats about 42 hahaha Paper Tiger was right !
For clarity, nothing I say is advice....
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There's an academic paper somewhere about diversification and the benefits thereof. As peat states, it is the only free lunch but there is an optimal number of stocks beyond which the additional benefit of a further stock becomes practically nil. From memory, it's surprisingly low, somewhere in the 10-15 band if I remember correctly. I know that I'm well past that point but then my portfolio is more a collection that a scientifically assembled portfolio!
PS I rather like the term "high conviction stocks". ll mine are such!
Last edited by macduffy; 30-03-2017 at 09:02 AM.
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Peat, I know portfolio diversification is all about risk management but where's the consideration of returns in this discussion?
Say 2 theoretical portfolios - one of 5 stocks returning 20% with a STDEV of 30% and another of 20 stocks with a STDEV returning 7% with a STDEVs of 20% (STDEV roughly from your chart)
I know which portfolio I'd rather have
But then again it's not as simple as that eh
Last edited by winner69; 30-03-2017 at 09:51 AM.
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