Number of Stocks in a Portfolio?

[DividendsandTea]

Hi everyone, new to the forum and DGI, so go easy on me!

I'm interested to know opinions on the number of stocks to hold in a portfolio and how this relates to their strategy? I understand with DG Investing a Portfolio often includes 20+stocks and this is usually due to a number of reasons such as if one Company cancels or reduces it's Dividend this would have a lower impact on the portfolio. Also it is likely to reduce volatility; number of years until retirement etc so can see a lot of advantages.

From reading about Buffett's strategy (not just Buffett) it seems that he is an advocate of Focused investing and that holding less stocks allows an investor to have a better understanding of the company and that he believes that why would you put money into your 20th best idea and not your 1st? I know it's Buffett we're talking about and there are few of him about.

I guess both aren't mutually exclusive, really interested to hear thoughts on this?

[Roadmap2Retire]

Welcome to DGForum D&T.
I think what Buffett means by that you can build your wealth and grow your fortune by focusing on a few companies. But you have to consider the risk involved. Yes, if there is a fantastic opportunity - adn you could put all your energy, effort and money into building a company - you can get rich, but it comes with immense risks. In the public market however, with limited funds and the need to avoid excessive risk, its not a good idea to put all your eggs in one basket. Studies have shown that the unique risk can be mitigated considerably by owning as few as 12 stocks. See this article.

I hold about 25 companies myself and find that its quite manageable.

[DividendsandTea]

Thanks Roadmap2Retire and useful article!

The piece I'm referring to is in the book 'The Warren Buffett Way' which refers to a study that shows a Portfolio of 5-15 stocks increases volatility than the market but over a longer period the gains would be more than a larger Diversified portfolio. Thought was quite an interesting piece.

As you say it depends on a persons Risk / Reward profile and level of confidence in the stocks.

[Main Street Stock Investor]

D&T, Do not put all of your eggs in 5-10 baskets. Warrren Buffett owns more than 5-10 companies. Try to ensure that your DGI portfolio is diversified accross all 10 sectors, and initially take small positions to build out your portfolio. My portfolio's hold appox. 100 stocks and no stock is greater than 5% of the total porfolio. Good luck and welcome to the forum.

M$$I

[EricL]

I'd say 10 is the absolute minimum but personally wouldn't be comfortable with less than 20.

I have 50 positions in my dividend growth portfolio, and many that wouldn't have been part of my top 20 have been some of my best performers.

[earthtodan]

Investing is Warren's full time job and life calling. If you have a full time job doing something other than researching to invest your own money, it's probably good to spread out a little.

[CritMass]

34 Stocks, 1 ETF and 3 mutuals, plus cash. It's almost too much to "set and forget". Problems with MAT snuck up on me recently....guess I wasn't minding the store as I should have been. Most have high safety ratings, and many are traditional blue chips. All pay dividends. Doubt if I will add too many more.

[DividendGarden]

I have about 40 stocks and 5 ETF's. I just buy good quality dividend growth stocks when they are on sale, and my personality is that I'd rather have more positions than less, although my largest position is about 8% of my entire portfolio.

[Kerim]

I think the answer to this question depends a lot on where you are in your life cycle. For someone just starting to build their DG portfolio, I strongly suggest sticking with the best opportunities available at the time, even if that means holding a smaller number of stocks than ultimately desired, and even if that means that each holding represents a large portion of the portfolio.

As the portfolio grows and matures over the years, it makes sense to add holdings as good opportunities present themselves, both to take advantage of those opportunities and to diversify the portfolio.

In no case would I buy a company at too high a price, or overlook an excellent opportunity in a company I already own, just for the sake of increasing the number of stocks I own.

Some good related thoughts in this old thread about over-sized positions.

[crimsonghost747]

I feel that the more time I spend reading around the internet about investing, the more attractive looking companies I find. I'm still in the early phases of my portfolio and I just reached 20 stocks. I'm getting to the point where I want to stop buying into new companies and to focus on increasing my holdings in the ones I already own... mainly because I think having 50+ companies... I wouldn't really be following them that closely anymore.

So currently at 20.. probably aiming for a final number somewhere between 25 and 30. I've noticed that I spend so much more time following and reading up on companies that I already own, this is kind of why I want to invest a little into companies I want to own in the long term, even if I think they are a bit expensive at the moment. Recently I did this with JNJ, I think paying over $100 was a bit much but at least I have a tiny position that makes me automatically keep an eye on the company.. I know I will be adding more JNJ later on.

I'm looking to add one more stock into my portfolio in the next month or two and then I'm happy with what I have for the moment. Obviously at some point there will be other new additions but as I said I'll start focusing on increasing my holdings in my current positions and ultimately aiming for 25-30 stocks.

[cannew]

Currently have 19 and will probably be at 17 later. No funds, bonds or etf's

[800peace]

I have certain financial statement characteristics that I look for. To get a good result, my portfolio needs to be a representative sample of companies with certain financial statement characteristics. A proper sample size is at least 30. Another thing to consider is that I don't want my beginning investment in a company to be more than 3% of the total portfolio. So, I landed at 33 companies, however as time slipped into the future, there were bargains along the way and I think I'm up to 59 companies. I should mention that I have very sophisticated portfolio management software with huge databases helping me. In addition, I have very low turnover... Most of the sells in my port were from being acquired by another company.