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sometime too many stocks spread all over too thin also cannot see any much returns. best to concentrate just 2-3 stocks.
spreading too much around reduces risks but the reality is markets don't crash all the time. Most important is having discipline, If you follow my mantra don't short don't contra, don't leverage there's no chance that you will ever be caught out by sudden market movement. At most paper loss but everything still intact still sleep peacefully at night.
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Why do we need to invest in 10 to 30 stocks of different companies in different sector?
We need that because of assets allocation is even more important in a total portfolio of only stocks only.
We all face the same Market risk but can we face specific sector risk? Or the worst case specific company risk?
i definitely don't want to put all my money in Reits.
Even though the dividend yields are quite attractive.
There are other companies in some sectors which give reasonable yields too.
i think i should look for the best stocks in any sector i am interested in.
It's easier says then done.
It's hard work.
Keep on hunting mate.
Shalom.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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Agree with Temperament. Anyhow choose 30 stocks (or concentrated sector) to "diworsify" is worse than getting 10 stocks in different sectors. My personal discipline is to get no more than 2 stocks per sector. Then one will be forced to find the alpha stocks in that sector rather than chase beta.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
Think Asset-Business-Structure (ABS)
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I'm speaking from my own experience.
It's not how many stocks you hold that is important. It is the selection of stocks, the price at which you buy (and sell), how much you allocate to each convincing idea, and the process of rectifying bad decisions that drive performance.
My portfolio has about 50 stocks. But the performance has been far from that of an index. [trumpet]I'm up >40% this year and I haven't had a down year since the 2008 GFC.[/trumpet]
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12-11-2013, 01:25 PM
(This post was last modified: 12-11-2013, 01:26 PM by yeokiwi.)
I may own 1000 stocks but if another value stock just crawls by, I will still take the bait.
Therefore, there is no limit to how many stocks I will like to own.
And, I can kick any stock out anytime. Especially, a supervalue one pops up and I am running out of cash, I will clear some stocks from my portfolio to buy it.
A value stock is a value stock. What has it got to do with no. of stocks in your portfolio? In mathematical term, both events are almost orthogonal.
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(12-11-2013, 01:25 PM)yeokiwi Wrote: I may own 1000 stocks but if another value stock just crawls by, I will still take the bait.
Therefore, there is no limit to how many stocks I will like to own.
And, I can kick any stock out anytime. Especially, a supervalue one pops up and I am running out of cash, I will clear some stocks from my portfolio to buy it.
A value stock is a value stock. What has it got to do with no. of stocks in your portfolio? In mathematical term, both events are almost orthogonal.
Sorry for quoting but just a thought - suppose you have 10 stocks in your portfolio A1 - A10, say another one comes up and its better value than half the counters in your portfolio - do you i) add, ii) clear a few counters to overweight or iii) replace to equal weight of a weaker counter? I think it is this that should drive the allocation process.
Sometimes we think about the counters we own, and why/how we think they will outperform over time, it is seldom that they have the same reason and same timeframe. How do we then bridge between this, evaluate potential new acquisitions, and manage risk, to maximise our chances of winning? This is what that will drive the end number of counters for most people. However, it should be an outcome of the allocation process, not a first pass limiter.
For me it comes down to
1) how many do I know (size of my fishing net) and hence new ideas
2) amount of capital I have, and how quickly it is generated vs deployed
3) how easily I can any replace capital lost
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(12-11-2013, 01:25 PM)yeokiwi Wrote: I may own 1000 stocks but if another value stock just crawls by, I will still take the bait.
Therefore, there is no limit to how many stocks I will like to own.
And, I can kick any stock out anytime. Especially, a supervalue one pops up and I am running out of cash, I will clear some stocks from my portfolio to buy it.
A value stock is a value stock. What has it got to do with no. of stocks in your portfolio? In mathematical term, both events are almost orthogonal.
Theoretically it will work, but in practice, resources needed to filter the stock(s) to kick out from your portfolio. The work involved to filter 10 stocks, is vastly different from filtering 100 stocks, let alone filtering 1000 stocks.
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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(12-11-2013, 01:09 PM)cif5000 Wrote: I'm speaking from my own experience.
It's not how many stocks you hold that is important. It is the selection of stocks, the price at which you buy (and sell), how much you allocate to each convincing idea, and the process of rectifying bad decisions that drive performance.
My portfolio has about 50 stocks. But the performance has been far from that of an index. [trumpet]I'm up >40% this year and I haven't had a down year since the 2008 GFC.[/trumpet]
Congratulation.
If the benchmark is STI, than it is more than 30% above mark. If comparing with S&P, it is approx 15% above mark (S&P return YTD is 26% IIRC, a bull year in 2013)
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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Interesting discussion. Most of the quotes from the Gurus favour 10-30 stocks. I wonder whether is there anyone out there that preaches extreme diversification? (Besides the 50 stocks and the wonderful >40% return).
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Use this logic. If you only have 10. Can you suffer 10% write down from a bust ? Will you sleep peacefully.
If not, let say 5%. This mean 20 stocks. Still hard to sleep, increase to 30 stocks. Each on average 3.3%.
Sure in reality is not equally distributed. If you have a Top stock taking 10%. and you are comfortable with 5% only.
Looks for the other or others to reduce it.
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