7 FAQs: “How Should I Allocate My Portfolio?/How Many Stocks Should I Own?”
March 1, 2020
You’ve asked us some great questions, and here are our answers! We’ve pulled together your most-asked questions into our new “7 Most Common Questions” article series.
One of the most-asked questions at 7investing is how investors should think about allocating their portfolio, namely pertaining to how many stocks you should own and what your weighting of those individual positions should be.
The short answer: There’s more than one way to build a portfolio. How many stocks you own (and how you allocate your capital to each of those stocks) is up to you. But we do have some thoughts on the matter that could be helpful.
The longer answer: At risk of disappointing those of you who’d like a concrete answer to this oft-posed inquiry, there’s no hard-and-fast rule for how many stocks you should own, or for how widely (or narrowly) allocated your portfolio should be.
To be clear, 7investing is not a brokerage, so we can’t manage your money or provide individualized investment advice. Rather, we believe investing is a highly personal endeavor (see principle #1 here). Just as nobody cares about your money quite as much as you do, nobody can tell you exactly how many stocks you’re the most comfortable owning.
In general, of course, the smaller the number of individual stocks you own, the more prone your portfolio will be to the underlying volatility of those individual names. And the converse is true for a larger number of stocks, in both cases assuming the unlikely scenario that each stock is equally weighted as part of the whole portfolio.
Some people might prefer a relatively narrow portfolio of 20 to 30 stocks, while others might enjoy building a portfolio of 80 to 90 individual names over time. This certainly doesn’t mean those names must be equally weighted of course; too often disparate performance figures mean they don’t stay that way for long even if they started as equivalent-sized positions.
For our thoughts…
That said, we do occasionally discuss the topic of portfolio allocation and the size of starter positions at 7investing, both as a team and on an individual basis.
For the latter, consider listening to our recent (June 18) 7investing Podcast episode, “Our Team’s Investing Process.”
For the former, note we (the 7investing advisor team) each occasionally share our personal holdings and discuss allocations in our respective Twitter feeds. If you’d like to follow along with our daily investing musings outside of our formal updates and recommendations at 7investing.com, I’m @7investingSteve, Simon Erickson is @7innovator, Austin Lieberman is @7AustinL, and Matthew Cochrane is @Matt_Cochrane7.
More answers from our “7 Most Common Questions” series:
- Is 7investing a brokerage?
- Does 7investing offer discounted or promotional rates?
- Do I really need to buy all 7 stocks each month?
- Which 7investing stocks are best for me now?
- How Should I Allocate My Portfolio?/How Many Stocks Should I Own?
- Why Doesn’t 7investing Assign Price Targets?
- Does 7investing Tell Subscribers When to Sell?