How many stocks should you own?
People always love to ask this question.
1. If you own too many stocks it becomes an ETF that follows the market
It is called the Dow 30 for a reason.
2. If you don't own enough stocks your portfolio is more volatile and risky
Look at Facebook. It has been on a wild ride.
I believe in the long term success of Facebook, but the short term has major volatility.
3. What is your investment strategy?
Are you an ETF investor?
Then it does not matter how many stocks you own.
Are you a growth investor?
Then you probably want to own fewer stocks to increase your chances of picking winners.
Are you a dividend investor?
Then you probably want to own more stocks to receive more consistent dividend payments.
4. There is no limit to how many stocks you can own.
Some people want to be really diversified and that is totally fine.
5. Whenever I buy into a new stock I ask myself, can I invest at least $1,000 into this stock
You may think that is a lot or a little based on how much you invest.
The goal of having a minimum investment number is to make you think twice about investing into a stock. I take seriously the money I invest into a business, I become the owner of that business and plan to owner for the long haul.
6. Different accounts, different goals
I have 4 different investment accounts:
- ROTH IRA
- 401k
- HSA
- Stock brokerage account.
I different goals for different accounts. My HSA is all about health and safety, so I take a little bit less risk with that account. The ROTH is tax free so I put more income producing assets in that account.
7. For me, I like to own a minimum of 4 stocks
8. For me, I like to own no more than 20 stocks
9. I am also a little younger at the moment and can afford to take more risk
How old are you?
Do you support a family?
Are you on the same investment page as your spouse?
Do you have a fully funded savings account?
You need to answer these questions before you start asking yourself, how many stocks should I own.
10. There is no magic number
The richest people in the world made their fortuned by owning one stock: their business.
Amazon
Microsoft
Oracle
All single businesses that made their owners wealthy.
If you really believe in the future success of business and it has a solid track record then do not be afraid to invest heavily into it.
11. Winner keep winning
I do not see Google, Apple or Microsoft imploding any time soon.
I imagine that over the long run their will continue to be really profitable.
Do not be afraid to keep investing into great stocks that continue to perform well. I do not have $1 Million sitting in my bank account to invest into the market. I am earning more money all the time. As I earn more I investment more. And I keep investing into the businesses that I believe.
12. Deals happen
Energy stocks.
They are like the siren that calls to me in the wind and then I end up sinking my shipping when I approach them.
Energy stocks are really volatile.
But they pay a great dividend and if you time them right you can make a lot of money.
During COVID energy stocks were on SALE. No one was driving around.
Right now, 2022, bonds are on fire. Who would have thought.
Put some money aside and wait for the deals to happen and take advantage of them when they do. This is the benefit of having a watch list. Businesses you like, but are not ready to commit to.
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