Around 30 investment trusts (mostly dividend paying)
20 stocks (mix of growth and dividend paying)
15 ETFs (mostly growth)
Iāve not counted the 40+ āfunā fractional US stocks which have less than Ā£100 invested in each
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Sectors:
Other = 18.3%
Energy = 16.8%
Tech = 10.4%
Utilities = 10.3%
Mining = 7.7%
Health = 6.5%
Property = 3.2%
Food and drink = 3%
Consumer goods = 2.4%
Industrials = 1.8%
Telco = 1.7%
Professional services = 0.7%
Construction = 0.7%
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I aim at 20-30 positions, not more.
I do it mostly by limiting my minimum opening position size by 5% of portfolio. It was a struggle at some point - when my portfolio was small, it was kind of OK to invest $1,000 - $2,000 in a single company. But then, as it grew, I started to realize that I subconsciously try to split my bets and whenever I have, say, $20,000 to invest I try to pick 4-5 companies and spread the money. I figured that it will lead to explosion of quantity of investment positions I have, and I thought that this is not a good idea, thus instituted this 5% rule.
I still do get some uneasy feeling investing $30,000 - $40,000 into a single company, but so far it didnāt affect my performance (because I am still well diversified), and number of companies in my portfolio is manageable.
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The more positions you hold, the more they move with the market. Reduced risk and also max profit/loss.
I have around 32 positions, the reason for this is i just find so many companies i love and want a piece of.
Once i find a company i like and i feel it is at a fair value level i start concentrating my weekly share purchases alongside my dividends into the new company, i build up a position and once im happy i move onto the next one. Every now and then Iāll check back to see if im happy with buying more shares after a re-evaluation.
The dividends from my older positions help fund the purchases for my new positions. This ensures the dividend cash flow into my portfolio is always going towards what i consider value.
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Iām at about 40, my rationale being that most 30 are speculative shares which are small investments and I am not adding to unless something new comes to the fore.
About 10 of my picks are serious growth investments which I am adding to regularly. These include individual stocks and ETFs, the latter of which will eventually become my main focus.
As a new and rapidly learning trader my investing method has evolved since November but I have not closed all or indeed many positions which I may close in the future.
I can see that holding lots of positions can be challenging but the diversity will hopefully be beneficial in the long run, with one or two of those speculative stocks taking off and paying for the rest.
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38 positions in varying percentages - a mixture of ETFs, bonds and a couple of trusts and individual stocks which are mainly UK large cap dividend stocks.
I have 5 Non UK stocks (other than those in global and European ETFs):
$RY, $ADM, $UUUU, KEMIRA, E.ON
I aim to reduce to about 30 positions (or fewer) .- received wisdom suggests 30 should provide adequate diversification. I donāt know how true that is but Iām sure a lot must depend on good sector, territorial and currency diversification.
At the moment, my worst position is -24%, my best is +32% with tons of red in between but I think this is not a good time to make decisions about any of these.
At what point do we sell everything, buy gold and bury it in a hole in the ground?
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Because you might be wrong.
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Itās a fair point. There were times last year where I thought I may be wrong as things werenāt going smoothly, but at that point I had maybe one years worth of savings invested. Now weāre talking two. I wouldnāt do the same if we were talking 10 years worth of savings or even 5. Any further money into my account will be into other stocks to diversify but I donāt think I will ever want to hold more than about 5 stocks at once.
What I have been wrong about over the last year is the stocks I sold to move money into my current stock. A lot of them have absolutely tanked since I sold. I used to hold positions in the likes of ARB, CINE, DDDD, SNG, FXPO, GDR, JDW, NEX. Look at all of these now! Some have dropped by 75% or more. Diversification isnāt always the answer. Investing in well researched undervalued stocks is - weather that be one or ten. Unfortunately I donāt have the time to āwell researchā lots of stocks.
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Absolutely. Some of the comments prior to yours reveal a lack of understanding of what diversification means in the context of share portfolio management.
Firstly the point is the aim is to diversify risk. Be clear what you are diversifying!
Secondly buying several stocks that for one reason or other are correlated doesnāt diversify risk. By correlated I mean if two stocks always move up and down in tandem you donāt diversify risk. Often people who are buying some themed ETFās are doing precisely this: putting all their eggs in one basket. This āeggs in basketā metaphor is perhaps a reasonable one. You want several baskets. If you stumble perhaps one of your baskets drops but another one stays in your hands. You have ensured you will take some eggs home.
Thirdly buying several stocks in itself doesnāt diversify your risk because of market capitalisation. For example, I buy two shares. Share A is 1p. Share B is 1p. But share A represents only 0.0001% of the company, whilst B represents 0.01% of the company. I need to buy 100 shares of A to have a equally market cap weighted portfolio. This business of weighting has more to it and I have only touched the surface. But you can see the concept in play in index weighted Trusts/ETFās.
Buying lots of shares may actually make your portfolio more risky not less. Some thought needs to go into the process. And yes investing in a few well researched undervalued stocks is a great idea. But be sure you know what undervalued means and importantly why the market undervalues the stocks you have found under the bushel. Plus plus be clear how long are going to wait for the marketās light bulb to go on.
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I donāt want to spoil your party, but some of these statements are incorrect.
Iāll focus on one that kinda feeds through to all the other statements.
You can reduce risk by owning positively correlated stocks as well, so any combination of stocks can lower idiosyncratic (unsystematic) risk as long as they are not perfectly positively correlated (which is impossible in practice).
If you want to see it in action, thereās apps like this one: Two Asset Portfolio Calculator
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@sebreitz I am talking about 100% correlation, But I agree with you there are nuances in all of this. The principle ideas hold. I did not want to get too academic and start going into Markowitz portfolio theory which I hope I still have a sound grasp of and so wonāt use your kind offer of a random calculator on the Internet.
The aim was to get at least some people to think a bit more about what diversification means to them. Even appreciating that it is āriskā that one tries to diversify is a good start. That term āriskā itself has connotations in finance theory that lay people here may not appreciate (and one which I hand wavingly handled).
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