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Monday, 19 Oct 2009
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How many stocks?

STUPID QUESTION: Could you please tell me what would be the recommended number of stocks a small to medium-size investor/trader should have (on average)? And also if there is a recommended maximum percentage of total portfolio one should have in only one stock (say 20%)?

REPLY: There used to be an accepted idea that more than 13 stocks was too many because you couldn’t possibly understand and manage any more than that. In Australia that idea came from JB Were who used to have a 13 stocks suggestion on their website. The suggestion being that beyond 13 stocks the advantage of further diversification is outweighed by the cost/effort of managing another stock. There has to be a cut off

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