It's an interesting topic. I have never been as large as 70 to 80. Right now, I am holding 24 stocks which is a lot for me.
How much should you hold? I'd say that it depends on a lot of factors. Which kind of investor you are is one. How big is your portfolio in value is an other one.
My portfolio still being modest, it would not be economical to diversify in 70 or 80 stocks. I also like to be more focused on specific stories. It would be difficult while holding so many stocks...
There are two things about diversification that I have learned in the past years:
1. You really have to be prudent about sector diversification. I don't mean to hold a stock in every sector, but certainly not to invest just in one or two sectors. Geographic diversification is also important, albeit hard to achieve through the markets (mutual funds may be a solution here). IMO, you at least should make sure that a good part of your holdings have significant income abroad.
2. A prudent investor should also make sure that he is not over-weighted on a position, particularly on a shaky one. I know that the mantra is to sell the loser and to hang on the winner, but when you winner has become too big compared to the rest of your portfolio, you should consider to sell part of the profit and rebalance the proceedings. Of course, some investors may think otherwise (Warren Buffett certainly do), but you have to be quite sure of your thinking if you decide to hold to your gains.
This is not great thinking, but it's my opinion. Hope this will help. |
