Any advice on how many stocks to hold?

[Ripeka]

Hello everyone - I have been an avid reader of sharetrader for a long time and enjoyed so many of your contributions - great stuff thanks. Could do with a spot of advice please. I have unexpectedly got $100k to invest. Keen to invest in more blue chip stuff (as I already have a speculative portfolio with 30k in NGE, CUE & HGD). My question is how many different stocks should i be holding the $100k across do you reckon? Five? Ten? 15? Dont plan on trading; am holding for medium to longer term. And if anyone wants to venture their advice with stocks, all advice happily received so I can measure it up against what I am leaning towards (healthcare, banks, energy).

As a side note, have older posts been deleted from sharetrader? I am sure there used to be more info under this thread heading but may be my imagination?

[JBmurc]

Everyone to their own- my current portfolio is 6-8 different shares when I helped invest 1.8mill AUD I took it out to 12 personal wouldn't spread it to thin it takes time to keep up with companies latest news ,reports etc better of being real confidence an have good knowledge on 6 stocks than half an much on 12 esp if you don't have many hours per week to study an keep up with the play

[peat]

diversifiable risk is reduced well with 8 stocks , and increasing the number to 15 maximises this risk reduction but further increases in the number of stocks after that achieves little.

[Lizard]

Unless you have a strong conviction that this is the "right time" to invest, I would split the money into 3 or 4 parts and invest the amounts at least 3 months apart. (I would then probably buy 2 or 3 shares with each part). That avoids investing it all and then watching the market drag everything down.

It also means you are only picking the 2 or 3 best stocks you can find at a time - which may improve the quality of your picks.

My personal favourite place for finding long term buys is at the $100-$400m market cap - i.e. large enough to be established, liquid and profitable, but small enough to still be relatively unknown and have room for growth. Look for good ROE, low debt and a strategy that makes sense and is consistent from report to report and presentation to presentation.

[h2so4]

Blue chip stuff??????? Like above 10b market cap? I'd say 4 and I would keep 25% in cash.

[shasta]

Hello everyone - I have been an avid reader of sharetrader for a long time and enjoyed so many of your contributions - great stuff thanks. Could do with a spot of advice please. I have unexpectedly got $100k to invest. Keen to invest in more blue chip stuff (as I already have a speculative portfolio with 30k in NGE, CUE & HGD). My question is how many different stocks should i be holding the $100k across do you reckon? Five? Ten? 15? Dont plan on trading; am holding for medium to longer term. And if anyone wants to venture their advice with stocks, all advice happily received so I can measure it up against what I am leaning towards (healthcare, banks, energy).

As a side note, have older posts been deleted from sharetrader? I am sure there used to be more info under this thread heading but may be my imagination?

I've always had a set criteria of a maximum of 5 stocks, & for $100k i'd look at 4 - 5 stocks.

Why i limit myself to a max of 5, is that if you wouldn't be prepared to top up your existing holdings (in lieu of buying a new stock) then why are you holding it!

Another idea would be to put $25k into 3 stocks & hold $25k cash to await any opportunities that present themselves.

I like your idea of focussing on healthcare (retirement villages) & energy, + either banks or insurance companies.

Some other areas i like are agriculture, water maintenance companies, & even funeral homes (like ASX:IVC)

We need healthcare, energy, food & water & we all die!

[Ripeka]

thanks everyone for your thoughts. Much appreciated. Some good stuff for me to reflect on that is very helpful

[Phaedrus]

On the face of it this is a simple question, but in fact the answer is influenced by many factors, and opinions vary widely. Here is a link that summarizes many different views :-
http://www.helium.com/debates/150554-portfolio-diversification-positive-or-negative
Too low a number increases risk disproportionately, while too high a figure means that you are simply buying the Index. My personal opinion is that less than maybe 3 is too few and more than, say, 12 is too many. Once you get over about 10 stocks, the risk reduction you gain by adding more stocks becomes statistically insignificant. With a large portfolio, it is all too easy to overlook poorly performing stocks and neglect addressing the problem. Mary Holm (NZ Herald) suggests that "more than 50" stocks would be a good portfolio!
The more money you invest, the more stocks you will probably hold. Conversely, it is not cost-effective to invest, say, $10,000 over 5 stocks, for example.
Ultimately, there is no right or wrong here and there is a lot of room for differing personal opinions.

[winner69]

A good article to show why thinking up a number isn't really that relevant
http://www.efficientfrontier.com/ef/900/15st.htm

Mary is prob right that you should have 50 stocks if you don't want to go the poor house .... lowers rsik a heck of a lot but then if markets keep down anyway it doesn't really matter how many stocks you have cause you'll end up in the poor house anyway

Even if you do decide on the 'right' number than you have to make the decesion like 'do I put the same amount in each' or something else ... and then 'do i need to reweight my protfolio every so often'

I'll stick to my active appraoch .... invest in things I sort of understand .... only hold when prices are trending up (ie sell if start trending down) .... limit the number of stocks held to under 10 at any time ... but not to worry if at times you don't have any equity investments at all. In saying that I do have a sizeable long term investment in one stock that I will probably hold until they get taken over because I'll have to get the broker to find a buyer for me or take the the inevitable hit if i decided to bail out quickly on the market

With long term expected returns from equity markets likely to be below average for the foreseeable future (as they have been for some years now) this active approach is the only way to go with equities .... otherwise you'd be better off just getting into some reasonable yielding bonds or something

[JBmurc]

thats the thing it more so how much money you invest in each I for one have 40% of my entire portfilo valve in one share CFE with the other 60% between 6 others
Not saying this is idea CFE going from 43 to 32 after 7cps divie hasn't been nice when SP gets to fair value different story

[peat]

these two pictures represent the academic approach on reducing non systematic risk by owning multiple securities.