Diversification - how many stocks is too many?

i got 25 that i have dabbled in but i think in the long term i am going to aim for about 12 well established companies in 8-10 different sectors.

But all depends what your after, if you trying to day trade or long term. I am thinking of 4 or 5 for long term / divi payers. But then with the current market so volatile its easier to make some gains better than the up coming divi

I’m looking 10-15 years down the line. At the moment I am snapping up stocks while they are relatively cheap. Taken a big hit on cancelled dividends, but hoping when divs return I will have much larger holdings in the relevant companies.

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I disagree. I started on the 7th of May and hold 12 shares now. I have been fairly succesfull in the sense that my value is rising but that is because Naked Wines and Vodafone are rising a lot (other shares as well but not as spectacular). On the other hand, my National Express shares have tanked. Had I only invested in 2 shares, the result might have been different. But then again, I am here for the long run not looking to make gains of trading the whole time.

You can disagree.

I am just passing on the information on how the most successful investors in the world have achieve their success.

If you don’t have any risk management in place then concentration is to be avoided.
You sound like you are just starting out.
I’d recommend reading the O’Neil book and there are also many others worth reading. Lynch, Minervini, Darvas, Livermore all turned a small amount of capital into fortunes and have books.

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I suspect they can get away with concentrated portfolios because they are very successful investors, rather than they are successful because they have concentrated portfolios.

Diverse is the way to go for us mere mortals

Pretty sure the number of people who turned a small amount of capital into a fortune is dwarfed by the number of people who turned a small amount of capital into an even smaller amount of capital

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There are definitely lessons to be learned from successful investors but not all of them work at a much smaller scale - for example compounding small amounts won’t make you Buffett without access to a lot more cash to invest!

Diversification is interesting in terms of spreading risk and tracker ETFs help massively with that, I think once you start to end up with a largely diverse portfolio of individual stocks then unless you follow all those sectors and stocks well then you might start to introduce more risk than if you stick to investing in a smaller number of stocks in areas you understand better.

Just my view and YMMV!

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Perhaps it’s also worth reading these guys books for any of you who share the view that they are great stockpickers.
The reality is they have good risk management so even if a majority of their picks don’t work they are still making money as they are cutting their losses early.

Most investors lose money in the markets and give up. Most people have to go through the cycle of making lots of expensive mistakes and slowly learning from them.

The best investment you can make when starting out is in books. They will save you from many of the most common mistakes investors make for a very low cost compared to the losses you will make if you try and work it out on your own.

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I’ve invested in what I know an understand. I’ve picked out 10 or so stocks which I like and I think have growth potential. They’re also in industries that I’ve worked in so have an idea of seasonality, technical capability and a good idea of how things run. So far it’s not let me down at all, and I keep drip investing into them each month and re-shuffling money between them.

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I think, seeing at it is generally held to be good advice to only buy into the companies that you are able to understand and put in the time to research, etc, that you should focus on a select few companies that you are very confident in for the long term.

Diversification is really just a hedge against the time/effort needed for research. Of course, you do take on more risk per holding with fewer companies, but a long term investor should have plenty of chance to re-assess the prospects of any of those companies and avoid knee jerk reactions if the value falls in the short term.

I have 9 companies in my portfolio on Freetrade currently, and I tend to see 7-10 as a good mix, but with 3-4 main stocks that take up >75%.

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Thanks! I’ll check out that book.

Nearly a 1/5 of stocks losing 75% value, has made me happy I focus on ETFs

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Don’t forget the calendar aspect of it for dividend cash investors, to ensure you’re getting that spread of money all year round:

Stock 1: JAN - APR - JUL - OCT
Stock 2: FEB - MAY - AUG - NOV
Stock 3: MAR - JUN - SEP - DEC
Stock 4: APR - JUL - OCT - JAN

Although, this doesn’t nessaarily mean you have to have > 40 stocks all flying around.

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I only have one that is 75% down - good old Aston Martin! Been a rollercoaster since early March, with a swing from 30% up to 30% down.

Light at the end of the tunnel though - yesterday was the first time in months my portfolio service is in the green :slight_smile:

Mine was down by a lot also, today it has just gone green!

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Having read the comments here, I have come to the conclusion my portfolio would terrify a lot of you! :rofl:

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Why would you spread your dividend payouts over the year? Doesn’t that have the risk that you are investing in the wrong company just because of the payout date? What would be bad about getting paid only in July and January?

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Do share

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I don’t think it’s a case of it being ‘bad’ but some income seekers may wish to try to get monthly income from their investments, to perhaps cover monthly expenses in the future.

Getting £600 in January and July is the same as getting £100 every month. I don’t see why having the dividends spread over the whole year is a better strategy. If you are investing, surely you can keep on to your money when it lands in your bank account and not spend it at once.

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It’s not a better strategy, just a different one. Some people might not be able to resist spending all their money at once, once it’s in their bank account.

I currently get paid my wages monthly and I’m not sure I’d want to try to cope with just being paid in January and July (even though I would get the same amount overall) and try to divvy up my spending on a monthly basis.

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