sharetrader
Page 1 of 3 123 LastLast
Results 1 to 10 of 24

Hybrid View

  1. #1
    Member
    Join Date
    Sep 2007
    Posts
    400

    Default 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?

  2. #2
    Reincarnated Panthera Snow Leopard's Avatar
    Join Date
    Jul 2004
    Location
    Private Universe
    Posts
    5,853

    Exclamation If you ain't going to say why

    Quote Originally Posted by voltage View Post
    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
    om mani peme hum

  3. #3
    Legend peat's Avatar
    Join Date
    Aug 2004
    Location
    Whanganui, New Zealand.
    Posts
    6,435

    Default

    somewhere between 18 and 25 is about the optimal amount.
    Diversification Capture.JPG
    For clarity, nothing I say is advice....

  4. #4
    Banned
    Join Date
    Nov 2013
    Posts
    8,516

    Default

    I hold 3 currently and not interested in holding many more than that.

  5. #5
    Legend peat's Avatar
    Join Date
    Aug 2004
    Location
    Whanganui, New Zealand.
    Posts
    6,435

    Default

    Quote Originally Posted by couta1 View Post
    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....

  6. #6
    Member
    Join Date
    Sep 2007
    Posts
    400

    Default

    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

  7. #7
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,221

    Default

    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 09:00 PM.

  8. #8
    Legend peat's Avatar
    Join Date
    Aug 2004
    Location
    Whanganui, New Zealand.
    Posts
    6,435

    Default

    Quote Originally Posted by percy View Post
    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....

  9. #9
    Veteran novice
    Join Date
    Jun 2007
    Location
    , , .
    Posts
    7,289

    Default

    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 08:02 AM.

  10. #10
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,737

    Default

    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 08:51 AM.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •